Utility Theory Approaches May Be More Applicable to Actual Situations

question 74

Multiple Choice

Utility theory approaches may be more applicable to actual situations than the Taylor-Russell methods because

• A)the definition of success can be in terms of a continuous variable.
• B)utility theory does not consider dollar values.
• C)they are easier to apply.
• D)the information needed for the calculations is easily obtained.

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Definitions:

Fixed Overhead Rate

A predetermined rate used to assign fixed overhead costs to cost objects, based on a specific activity level or base.

Normal Capacity Hours

The amount of production capability a company can expect to achieve under normal circumstances over a specific period.

Quantity Labor Variances

The variation between the actual number of labor hours utilized and the expected hours, usually impacting the cost of production.

Price Labor Variances

Refers to the difference between the actual labor cost incurred and the standard labor cost for the actual production achieved.