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The Opportunity Cost of a Particular Activity Is the Sum

question 7

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The opportunity cost of a particular activity is the sum of the benefits that could have been received from all foregone activities.


Definitions:

Contribution Margin

A financial metric that represents the difference between a product's price and its variable costs, indicating how much contributes to covering fixed costs and generating profit.

Variable Cost

A financial term describing expenses that vary directly with the production volume, such as materials and labor.

Fixed Costs

Expenses that do not vary with the level of production or sales, such as rent, salaries, and insurance premiums.

Activity-Based Costing

A costing method that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each.

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