The Presence of a Learning Curve May Induce a Decision

question 137

Multiple Choice

The presence of a learning curve may induce a decision maker in a startup firm to choose:

• A) low levels of output to exploit economies of scale.
• B) high levels of output to exploit economies of scale.
• C) low levels of output to shift the average cost curve down over time.
• D) high levels of output to shift the average cost curve down over time.
• E) to produce more than one output.

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Definitions:

Overhead Applied

An accounting method used to allocate estimated overhead costs to specific products or job orders based on a predetermined rate or method.

Machine Hours

A measure of the amount of time a machine is operating during a specific period.

Under/Overapplied Overhead

This term identifies the discrepancy between the estimated overhead costs allocated to products or services and the actual overhead costs incurred.

Standard Cost

The estimated or predetermined cost of manufacturing a single unit of product or performing a service, used for budgetary and performance evaluation purposes.