The Advantage of Using Practical Capacity to Allocate Costs

question 104

Multiple Choice

The advantage of using practical capacity to allocate costs:

• A)is that it allows a downward demand spiral to develop
• B)is that it focuses management's attention on managing unused capacity
• C)is that budgets are much easier to develop
• D)Either A or B are correct.

Explain the significance and calculation of free cash flow.

Understand the adjustments needed to reconcile net income with net cash provided by operating activities.

Recognize ethical considerations in financial management and reporting.

Understand the benefits and purposes of a statement of cash flows in financial analysis.

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Definitions:

Monopolistic Competition

The market structure that exists when there are fewer businesses than in a pure-competition environment and the differences among the goods they sell are small.

Competitive Environment

The dynamic external system in which businesses compete for resources, customers, and market space.

Pure Competition

The market structure that exists when there are many small businesses selling one standardized product.