You Operate a Car Detailing Business with a Fixed Amount

question 13

Multiple Choice

You operate a car detailing business with a fixed amount of machinery (capital) , but you have recently altered the number of workers that you employ per hour. Three employees can generate an average product of 4 cars per person in each hour, and five employees can generate an average product of 3 cars per person in each hour. What is the marginal product of labor as you increase the labor from three to five employees?

• A) MP = 3 cars
• B) MP = 1.5 cars
• C) MP = 15 cars
• D) MP = -1 cars

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Definitions:

Standard Quantity

The expected amount or volume of a specific input or material required in the production of goods or services.

Materials Price Variance

The difference between the actual cost of materials and the expected cost based on standard pricing, used to evaluate cost management.

Purchasing Department

A division within a business that is responsible for acquiring goods and services needed for operations.

Standard Cost

A predetermined cost of manufacturing a product or providing a service, used for budgeting and performance evaluation.