Which One of the Following Statements Is True

question 23

Multiple Choice

Which one of the following statements is true?

• A)The EOQ is most accurate when both inventory and order costs are estimated on a full cost basis.
• B)The EOQ is most accurate when both inventory and order costs are estimated on a pure variable cost basis.
• C)The EOQ is most accurate when inventory costs are estimated on a full cost basis while order costs are estimated on a pure variable cost basis.
• D)The EOQ is most accurate when inventory costs are estimated on a pure variable cost basis while order costs are estimated on a full cost basis.

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Definitions:

Total Revenue

The total income generated from the sale of goods or services before any expenses are subtracted.

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials and labor.

Fixed Costs

Expenses that remain constant regardless of the amount of production or output, like lease payments or wages.

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance, which are incurred regardless of the amount of goods or services produced.