Holding All Other Things Constant, an Increase in Variable Selling

question 46

Multiple Choice

Holding all other things constant, an increase in variable selling costs will affect:

• A)the selling price under the absorption costing approach to cost-plus pricing.
• B)the profit-maximizing price.
• C)both the selling price under the absorption costing approach to cost-plus pricing and the profit-maximizing price.
• D)neither the selling price under the absorption costing approach to cost-plus pricing nor the profit-maximizing price.

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Definitions:

Incremental Costs

The additional costs incurred when increasing the level of an activity or output by one unit.

Production Capacity

The maximum output that a manufacturing facility can produce under normal working conditions.

Opportunity Costs

The value of the best alternative forgone as a result of making a decision.

Widgets

A generic term used to refer to a hypothetical manufactured product or any small device or gadget.