Question 3

1. Historical financial statements are meant to help users assess all of the following, except:

	A.	Likely success of new products
	B.	Performance of management in earning income
	C.	Profitability of the business
	D.	Solvency of the business

4. A company currently produces both regular and deluxe models of a particular product. The deluxe model requires the company to buy special metal trim for decoration. If the company stops producing the deluxe model, it will no longer need to buy the metal trim. In considering whether to stop producing the deluxe model, the trim is best characterized as:

	A.	A capacity cost
	B.	An avoidable cost
	C.	An interchangeable cost
	D.	A fixed cost