BUSINESS ADMINISTRATION
ACCOUNTING FOR MANAGEMENT
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
True
|
|
False
|
|
True to some extent
|
|
None of the above
|
Detailed explanation-1: -Marginal cost is the cost of producing one extra unit of output. It can be found by calculating the change in total cost when output is increased by one unit. It is important to note that marginal cost is derived solely from variable costs, and not fixed costs.
Detailed explanation-2: -Marginal cost is the expense incurred by a business for producing an additional unit of a good or service. It is calculated by taking the total cost of producing additional products and dividing it by the total number of extra units produced.
Detailed explanation-3: -Marginal costs are a function of the total cost of production, which includes fixed and variable costs. Fixed costs of production are constant, occur regularly, and do not change in the short-term with changes in production.
Detailed explanation-4: -Fixed costs do not affect the marginal cost of production since they do not typically vary with additional units. Variable costs, however, tend to increase with expanded capacity, adding to marginal cost due to the law of diminishing marginal returns.