The Profit-Maximizing Rule for Employment of a Variable Input Is

question 22

True/False

The profit-maximizing rule for employment of a variable input is to employ that input until its marginal revenue product is equal to the marginal cost of the input, as long as the marginal cost of the input would be at least equal to or above the marginal revenue product of the input for a greater quantity of the input.

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Definitions:

Activity Level

A measure of the volume of production or services activity within a company, often used to allocate variable costs.

Revenue Variance

The difference between the actual revenue earned and the budgeted or expected revenue, indicating the effectiveness of sales strategies and market conditions.

Activity Level

A measure of the amount of work performed or units produced, used often in costing to allocate fixed costs properly.

Manufacturing Overhead

All manufacturing costs that are not directly related to the production of a product, such as factory rent, utilities, and maintenance.