Which of the Following Statements About Accounting for Changes in Fixed

question 11

Multiple Choice

Which of the following statements about accounting for changes in fixed assets is NOT true?

• A) When a firm is not operating at full capacity, sales may be increased without adding any new fixed assets.
• B) Since it requires time to get new assets operational, they are added in small discrete quantities.
• C) Fixed assets are added in large discrete units called lumpy assets.
• D) All of these

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Definitions:

Unit Contribution Margin

The difference between the selling price per unit and the variable cost per unit, showing how much each unit contributes to covering fixed costs and earning profit.

Operating Income

The profit earned from a firm's normal core business operations, excluding deductions of interest and taxes.

Fixed Costs

Expenses that do not change in proportion to the volume of goods or services a company produces.

Capacity

The maximum output or producing ability of a plant, machine, or company under normal or specific conditions.