A Price Floor Is the Minimum Price That Covers All

question 28

True/False

A price floor is the minimum price that covers all costs of producing the service.

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Definitions:

Contribution Margin Ratio

The ratio of contribution margin (sales minus variable costs) to sales revenue, indicating the percentage of each sales dollar available to cover fixed costs and profit.

Fixed Expenses

Expenses that remain the same regardless of the level of production or sales activities.

Sales

The total revenue generated from the sale of goods or services by a company during a specific period.

Operating Assets

Assets used by a business in its day-to-day operations to generate income, including equipment, property, and inventory.