The Activity Director for City Recreation Is Planning an Activity

question 73

Multiple Choice

The activity director for City Recreation is planning an activity.She is considering alternative ways to set up the activity's cost structure.Select the incorrect statement from the following.

• A) If the director expects a low turnout, she should use a fixed cost structure.
• B) If the director expects a large turnout, she should attempt to convert variable costs into fixed costs.
• C) If the director shifts the cost structure from fixed to variable, the level of risk decreases.
• D) If the director shifts the cost structure from fixed to variable, the potential for profits will be reduced.

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Definitions:

Premium Amortization

The process of gradually reducing the premium paid on bonds purchased above their face value over the life of the bonds.

Straight-Line Method

The straight-line method is a technique for calculating depreciation of an asset by evenly spreading its cost over its expected useful life.

Semiannual Interest

Semiannual interest refers to the interest payment made two times a year on a loan or bond.

Present Value

The present valuation of a future financial sum or cash flow series, factoring in a specific return rate.