A Company That Makes Decorations for Christmas Trees Has High

question 15

Multiple Choice

A company that makes decorations for Christmas trees has high sales in its fourth quarter but very low sales during the rest of the year.It manufactures decorations steadily throughout the year,however.Which of the following is NOT a likely consequence of this scenario?

• A)The firm will need sources of short-term cash to fund inventory in the second and third quarters.
• B)The firm will see negative net cash flows in the second and third quarter.
• C)The firm will have a large short-term surplus in the fourth quarter.
• D)Cash payables will rise from the first to fourth quarter.

---

Definitions:

AVC Curve

Stands for Average Variable Cost curve, illustrating the average variable costs of production at different output levels.

ATC Curve

Average Total Cost Curve, a graphical representation showing how the average cost of producing one unit of goods changes with the level of production.

Average Fixed Cost

Average Fixed Cost is the fixed expenses of a company divided by the number of units produced, decreasing as production increases.

Marginal Product

The extra output or benefit received from using one more unit of a variable input.