While It Is Legitimate for a Firm to Follow Different

question 30

True/False

While it is legitimate for a firm to follow different accounting practices for financial reporting and tax purposes, the relationship between book and tax accounting is likely to remain constant over time, unless there are changes in tax rules or accounting standards.

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Definitions:

Fixed Factor

A resource or input whose quantity cannot easily be changed in the short run.

Diminishing Returns

A principle stating that if one factor of production is increased while others are held constant, the output per unit of the variable factor will eventually decrease.

AVC

Average variable cost, which is the total variable cost divided by the quantity of output produced.

ATC

Stands for Average Total Cost, which is the total cost per unit of output produced.