One Should Always Be Wary of Using Unit Costs for Decision-Making

question 4

Multiple Choice

One should always be wary of using unit costs for decision-making, because unit costs:

• A)disguise the true nature of how costs vary with production
• B)can be multiplied by a different number of units, suggesting that the cost data is scalable
• C)generate misleading results when the company faces an increasing cost curve
• D)ignore step-fixed costs
• E)all of the above

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Definitions:

Alpha

A metric used to measure the performance of an investment relative to a benchmark, reflecting the excess return of the investment compared to the overall market performance.

Time-Weighted Return

A method of calculating investment returns that eliminates the effects of cash flows into and out of the portfolio, focusing solely on the investment's performance.

Dividend

Profits paid out to shareholders by a corporation, usually as a form of earnings distribution.

Information Ratio

A measure of portfolio returns above the returns of a benchmark, to the volatility of those returns.