Which of the Following Is Incorrect

question 124

Multiple Choice

Which of the following is incorrect?

• A) Accounting profits generally overstate economic profits.
• B) Accounting profits do not take opportunity cost into account.
• C) Economic costs include not only the accounting costs but also the opportunity costs of the resources used in production.
• D) Managers should only be interested in accounting profits.

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Definitions:

Monthly Fixed Component

The portion of fixed costs, such as rent or salaries, that does not change with the volume of production or sales in a given month.

Lubrication Cost

The expense associated with maintaining machinery through oiling and greasing to ensure smooth operation.

Variable Lubrication Cost

A variable cost associated with the amount of lubrication needed for machinery in the manufacturing process, which varies with the level of production activity.

Machine Hour

A unit of measure that represents the operation of machinery or equipment for one hour, used in allocating manufacturing overhead.