In the Long Run,the Practice of Setting Price So That

question 137

Multiple Choice

In the long run,the practice of setting price so that it must at least equal the differential cost of producing and selling the product will cover all costs because

• A)fixed costs are differential in the long run.
• B)variable costs are differential in the long run.
• C)fixed and variable costs are differential in the long run.
• D)fixed and variable costs are discretionary in the long run.

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Definitions:

Aging Analysis

A method to evaluate and categorize accounts receivable based on the length of time an invoice has been outstanding to manage and estimate financial health.

Allowance for Doubtful Accounts

An estimate made by a company to account for receivables that may not be collected due to credit risk.

Bad Debt Expense

An expense reported on the income statement, representing the amount of receivables a company does not expect to collect.

Allowance for Doubtful Accounts

A contra-asset account that represents an estimate of the amount of accounts receivable which may not be collected, reducing the gross amount of receivables reported on the balance sheet.