Which of the Following Is an Advantage of Using Full

question 2

Multiple Choice

Which of the following is an advantage of using full cost of the product as the cost base?

• A) Managers are informed regarding the minimum long-run cost they need to recover to stay in business.
• B) Using the full cost of the product as a basis for pricing increases the temptation to cut prices below full costs.
• C) Fixed cost allocations can be arbitrary while using full cost of the product as the cost base.
• D) It requires a detailed analysis of cost behavior for computations and hence promotes a better understanding of the cost behavior.

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Definitions:

Partnership's Liabilities

Debts or financial obligations that a partnership is responsible for, which can affect partners' individual tax situations.

Liability Increase

A financial situation where the obligations or debts of a person or company grow.

Personal-Use Asset

An asset primarily used for the personal enjoyment or needs of an individual or family, as opposed to business or investment use.

FMV

Fair Market Value (FMV) is the price that property would sell for on the open market, between a willing buyer and seller, with neither being under any pressure to buy or sell.