In a Decision to Add or Eliminate a Product or Service

question 114

Multiple Choice

In a decision to add or eliminate a product or service, which of the following is an avoidable cost?

• A)Common costs
• B)Depreciation
• C)Variable overhead
• D)Allocated overhead

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Definitions:

Long-Run Scale

Refers to the time period in which all factors of production and costs are variable, allowing companies to adjust all inputs in response to market conditions.

Short-Run

A period in which at least one input is fixed, limiting the firm's capacity to adjust to changes in demand or market conditions.

Positive Profits

Financial gains that are greater than zero, indicating a company's revenues exceed its costs and expenses.

Variable Costs

Costs that change in proportion to the activity or volume of business, such as materials and labor.