Which Tests Must a Company Use to Determine Which Operating

question 108

Multiple Choice

Which tests must a company use to determine which operating segments require separate disclosure?

• A) Revenue test and asset test.
• B) Revenue test, profit or loss test, and asset test.
• C) Revenue test and profit or loss test.
• D) Profit or loss test and asset test.
• E) Revenue test, asset test, and liability test.

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Definitions:

Natural Monopoly

An industry in which economies of scale are so great that a single firm can produce the industry’s product at a lower average total cost than would be possible if more than one firm produced the product.

Unit Costs

The expense a business incurs to manufacture, warehouse, and distribute a single unit of a specific product or service.

Entire Output

The total amount of goods or services produced by a company, industry, or country within a specific period.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, leading to a decrease in cost per unit as output increases.