Which of the Following Is Not a Limitation of the Survivor

question 6

Multiple Choice

Which of the following is not a limitation of the survivor technique for measuring the optimum size of firms within an industry?

• A) since the technique does not employ actual cost data in the analysis,there is no way to assess the magnitude of the cost differentials between firms of varying size and efficiency.
• B) the managerial and entrepreneurial aspects of the production process are not included in the analysis
• C) because of legal factors,the long-run cost curve derived by this technique may be distorted and may not measure the cost curve postulated in economic theory
• D) a and b
• E) b and c

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Definitions:

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate manufacturing overhead costs to products based on a selected activity base such as labor hours or machine hours.

Direct Labor-Hours

The total hours of labor directly involved in manufacturing a product, used in calculating labor costs and efficiency in production.

Job-Order Costing

A system that assigns manufacturing costs to each product, providing a way to calculate the cost per item or job specifically.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to products or job orders, based on a planned amount of activity.