Refer to the Following Table: the Optimal Level of Activity

question 16

Multiple Choice

Refer to the following table: The optimal level of activity is:

• A)2
• B)3
• C)4
• D)5
• E)There is no optimal level in this case because marginal benefit does not equal marginal cost at any activity level.

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Definitions:

Controllable Fixed Costs

Expenses that do not change with production level but can be altered or managed by decisions at the management level.

Average Operating Assets

The average value of the assets that are used in the day-to-day operations of a business, calculated over a specific period.

Operating Assets

Operating assets are long-term assets used in the operations of a business to generate revenue.

Contribution Margin

The amount by which the sale of products or services exceeds variable costs, contributing to the coverage of fixed costs and profit generation.