Refer to the Following Information to Answer the Following Questions

question 32

Multiple Choice

Refer to the following information to answer the following questions.
Two firms both emit a pollutant,and the government wants to reduce emissions of this pollutant.Each firm can choose to emit up to six units.As firms reduce emissions,there is a marginal cost per unit.This data is presented in the accompanying table.

-The government allocates three allowances to each firm,where each allowance allows one unit to be emitted.The optimal outcome in this case is for ________ to sell one permit to the other firm,and a price that will be agreeable to both is ________.

• A) Firm 1; $10
• B) Firm 1; $90
• C) Firm 1; $50
• D) Firm 2; $100
• E) Firm 2; $40

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Definitions:

Flexible Factory Overhead Budget

A budget that adjusts overhead costs in response to changes in actual production or activity, allowing for more accurate costing.

Direct Materials Price Variance

The difference between the actual price and the standard price of direct materials multiplied by the actual quantity of direct materials used in producing a product.

Units

In business and accounting, units refer to the individual pieces or quantities of a product or service.

Variable Factory Overhead

Refers to the indirect, variable costs that change with the level of production output, such as utilities for the manufacturing plant.