Average-Cost Pricing

question 156

Multiple Choice

Average-cost pricing

• A) always results in a profit that is less than what was expected.
• B) will work out as expected when the firm's actual average fixed cost per unit is what was estimated when prices were set.
• C) sets the price at the point where average fixed cost is equal to average variable cost.
• D) ignores variable costs.
• E) is the only way to ensure that the firm will set a profitable price.

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Definitions:

Operating Segment

A component of an enterprise that engages in business activities from which it may earn revenues and incur expenses.

Separate Disclosures

Financial reporting requirement for specific information to be provided separately in financial statements to enhance clarity and understanding.

Profits

The financial gain obtained when the revenues generated from business activities exceed the expenses, taxes, and costs associated with sustaining the activity.

Total Losses

The sum of all expenses, debts, or damages that exceed gains and revenues.