Which of the Following Is a Reason a Company Would

question 57

Multiple Choice

Which of the following is a reason a company would be willing to accept new business at a loss?

• A)The new business will allow the company to reduce its fixed costs.
• B)The new business will always cover variable costs.
• C)The new business may result in certain customers influencing other potential customers.
• D)The new business will increase fixed costs.

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Definitions:

Ideal Standards

Standards that can be achieved only under perfect operating conditions, such as no idle time, no machine breakdowns, and no materials spoilage; also called theoretical standards.

Machine Breakdowns

Refers to the unexpected failures or malfunctions of machinery that disrupt the production process or operations.

Materials Spoilage

The portion of raw materials that becomes unusable and is discarded during the production process.

Direct Labor

Labor costs directly attributed to the production of goods or services, such as wages paid to factory workers or assembly line employees.