Which of the Following Is Not True When Determining the Selling

question 18

Multiple Choice

Which of the following is not true when determining the selling price for a product?

• A) Absorption costing should be used to determine routine pricing which includes both fixed and variable costs.
• B) As long as the selling price is set above the variable costs,the company will make a profit in short run.
• C) Variable costing is effective when determining short run decisions,but absorption costing is only used for long-term pricing policies.
• D) Both variable and absorption pricing plans should be considered,to include several pricing alternatives.

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Definitions:

Explicit Costs

Expenses directly incurred in the course of running a business, such as wages and materials.

Economic Costs

The total value of all resources used in the production of a good or service, including both explicit and implicit costs.

Normal Rate

A term often used to refer to the standard or commonly accepted rate for a financial or economic measurement, but can vary by context.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or investment.