GAAP

question 34

Multiple Choice

GAAP

• A) require all firms to use the same depreciation method.
• B) provide the basis for determining economic earnings.
• C) are set by the SEC.
• D) provide parameters within which a firm can manage its reported earnings.

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Definitions:

Total Variable Cost

The sum of expenses that change in proportion to the activity or volume of production.

Average Variable Cost

The total variable costs divided by the quantity of output produced; it fluctuates with changes in output.

Marginal Cost

The increase or decrease in the total cost that arises from producing one additional unit of a good or service.

Average Variable Cost

The per-unit variable cost, found by dividing the total variable expenses by the amount of output generated.