If It Is Possible to Spread Total Fixed Cost Efficiently

question 127

Multiple Choice

If it is possible to spread total fixed cost efficiently over a larger and larger quantity of output,then a firm will not experience

• A) an elastic demand curve.
• B) economies of scale.
• C) increasing returns to scale.
• D) decreasing returns to scale.
• E) the law of demand.

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Definitions:

Underapplied Manufacturing Overhead

This occurs when the allocated manufacturing overhead costs are less than the actual overhead costs incurred, leading to a cost variance.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including both material and labor costs.

Overapplied Manufacturing Overhead

A situation where the estimated manufacturing overhead costs are more than the actual overhead costs incurred.

Underapplied Manufacturing Overhead

The amount by which the actual manufacturing overhead costs exceed the applied manufacturing overhead costs for a period.