Table: Oil Production Costs

question 10

Multiple Choice

Table: Oil Production Costs

Refer to the table. If seven barrels of oil are produced, this firm is making:

• A) a profit because P >AC.
• B) a loss because MC > AC.
• C) a profit because MR > MC.
• D) a loss because TR < TC.

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Definitions:

Freight-in

The cost of shipping goods to the buyer's location, which is often included in the inventory cost.

Supplies Expense

The cost associated with the consumption of supplies utilized during an accounting period in the operation of a business.

Sales Discounts

A reduction in the price of a product or service provided by the seller to the buyer, often used as an incentive to encourage prompt payment or to increase sales volume.

Net Sales

The revenue from sales transactions after deductions of returns, allowances for damaged or missing goods, and discounts.