Under the Total Revenue and Total Cost Approach to Profit

question 13

Multiple Choice

Under the total revenue and total cost approach to profit maximization,

• A)firms equate total variable cost to total revenue in order to maximize profit
• B)profit is maximized when fixed cost falls to zero
• C)firms choose the level of output at which total revenue is the greatest distance above total cost when the firm earns an economic profit
• D)firms choose the level of output at which the changes in revenue and cost both equal zero
• E)total revenue is maximized when profit is zero

Recognize the role of budgets in managing organizational resources and their relationship with the financial accounting function.

Acknowledge how the evolving information needs of organizations influence changes in management accounting practices.

Understand the versatility and range of roles available to accountants with a CPA qualification.

Identify the components of the accounting information system, specifically the costing system, and its relevance to both financial and management accounting.

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Definitions:

Finished Goods

Goods that have gone through the entire manufacturing cycle and are prepared for customer acquisition.

Standard Costs

Preset costs for materials, labor, and overhead used to measure the performance of manufacturing activities against planned costs.

Variable Costing

A costing method where only variable costs are charged to product costs, with fixed costs treated as period costs.

Absorption Costing

A cost accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the cost of a product.