At a Company with Different Business Units, Individual Managers Make

question 109

Multiple Choice

At a company with different business units, individual managers make decisions by changing various assumptions of their budget in order to determine how the modifications would affect the operational and financial results. This is an example of:

• A)financial statement analysis.
• B)responsibility accounting.
• C)sensitivity analysis.
• D)zero-based budgeting.

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Definitions:

Marginal Cost

The variation in the overall expense that occurs when one more unit is produced, fundamentally representing the expense of manufacturing an extra unit of a product.

Overallocated

A situation in which resources, rights, or goods are distributed in excess of the optimal or desired level, often leading to inefficiency or scarcity in other areas.

Creative Destruction

A process whereby old, outdated industries and technologies are destroyed and replaced by new, innovative ones, driving economic growth.

Minimum AVC

The lowest point on the average variable cost curve, indicating the most efficient scale of production for minimizing variable costs per unit of output.