Buffalo Aircraft Doubles the Amount of All of the Inputs

question 1

Multiple Choice

Buffalo Aircraft doubles the amount of all of the inputs it uses-the factory doubles in size and twice as many workers are hired.After this expansion,the number of aircraft produced triples.If the price of inputs is unchanged,this means that Buffalo Aircraft is operating with:

• A)increasing marginal cost.
• B)economies of scale.
• C)increasing average total cost.
• D)decreasing average variable cost.

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Definitions:

Operating Expenses

Ongoing expenses for operating a business, excluding the cost of goods sold but including costs like rent, utilities, and payroll.

Budgetary Slack

The practice of underestimating revenues or overestimating costs when preparing a budget, to create a buffer that makes budget targets easier to achieve.

Revenue Projection

An estimate of the future sales and income generated by a company during a specific period, often used in budgeting and planning.

Quarterly Production Budget

A financial plan that outlines the expected production costs and output levels for a business over a three-month period.