The Use of Rule-Of-Thumb Measures Is Not an Exact Science

question 137

True/False

The use of rule-of-thumb measures is not an exact science and should be used with great care.

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Definitions:

Variable Costs

Expenses that vary directly with the level of production or sales volume, such as materials and labor.

Profitable

Generating revenue that exceeds the expenses, costs, and taxes needed to sustain the activity.

Average Total Cost

The cost per unit of output, calculated by dividing the overall production costs by the number of units produced.

Profit-maximizing

A strategy or point where a business reaches the highest possible profit level with given operational limits and market conditions.