If Financial Statement Data Are Used to Evaluate a Decision

question 46

Multiple Choice

If financial statement data are used to evaluate a decision to discontinue a business:

• A) Average costs are often mistakenly included as relevant information
• B) Average costs are often correctly included as relevant information
• C) Qualitative factors are irrelevant
• D) Financial statement data is useless in this decision-making context

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Definitions:

Marginal Utility

The increased gratification or utility derived from the consumption of an extra unit of a good or service.

Energy Drink

A type of beverage containing stimulant compounds, usually caffeine, that is marketed as providing mental and physical stimulation.

Utility

Describes the complete fulfillment derived from the use of a product or service.

Demand Curve

A graph showing the relationship between the price of a good and the amount of the good that consumers are willing to purchase at that price, ceteris paribus.