In the Long Run, a Firm Can Vary

question 233

Multiple Choice

In the long run, a firm can vary

• A) its capital but not its labor.
• B) its labor but not its capital.
• C) both its labor and its capital.
• D) neither its labor nor its capital.

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Definitions:

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate manufacturing overhead costs to individual units of production based on a chosen activity base.

Machine-Hours

A measure of production volume or activity based on the number of hours machines are operated in the manufacturing process.

Fixed Manufacturing Overhead

Fixed manufacturing overhead consists of the production costs that do not vary with the volume of production, such as rent for the manufacturing facility, salaries of manufacturing managers, and depreciation of factory equipment.

Selling Price

The price at which a product or service is offered for sale to a buyer.