Which of the Following Statements Is True

question 20

Multiple Choice

Which of the following statements is true?

• A) In determining reportable segments, two tests are applied and both must be met.
• B) In determining reportable segments, three tests are applied and all three must be met.
• C) In determining reportable segments, two tests are applied and only one must be met.
• D) In determining reportable segments, three tests are applied and only one must be met.
• E) In determining reportable segments, at least 80% of the revenues from external customers must be reported.

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Definitions:

Shut Down

A short-run decision by a firm to cease production due to unfavorable market conditions, not covering variable costs.

Fixed Costs

Costs that do not vary with the level of output or sales, such as rent, salaries, and loan payments, remaining constant regardless of business activity levels.

Total Revenue

The total amount of money a firm receives by selling goods or services, calculated as the unit price times the quantity sold.

Maximizing Profits

The process or strategy of adjusting the production and sale of goods and services to achieve the highest possible profit.