Use the Following to Answer Question

question 175

Multiple Choice

Use the following to answer question:
-(Table: Variable Costs for Lawns) Use Table: Variable Costs for Lawns.During the summer,Alex runs a lawn-mowing service,and lawn-mowing is a perfectly competitive industry.Assume that costs are constant in each interval;so,for example,the marginal cost of mowing each of the lawns from 1 through 10 is $10.Also assume that he can only mow the quantities of lawn given in the table (and not numbers in between) .His only fixed cost is $1,000 for the mower.His variable costs include fuel,his time,and mower parts.If the price for mowing a lawn is $70,how much is Alex's total cost at the profit-maximizing output?

• A)$3,500
• B)$2,800
• C)$2,100
• D)$1,500

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Definitions:

Manufacturing Overhead

The indirect costs involved in making a product, excluding direct materials and direct labor expenses.

Predetermined Overhead Rate

A rate used to apply manufacturing overhead to products or job orders, computed in advance for each period.

Traditional Costing

An accounting method that allocates overhead costs to products based on a single, volume-based cost driver, such as direct labor hours.

Direct Labor-Hours

Represents the total hours worked directly on the production of goods.