When a Manufacturing Company Has a Highly Automated Manufacturing Plant

question 37

Multiple Choice

When a manufacturing company has a highly automated manufacturing plant producing many different products,which of the following is the more appropriate basis of applying manufacturing overhead costs to work in process?

• A)direct labor hours
• B)direct labor dollars
• C)machine hours
• D)cost of materials used

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Definitions:

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.

Diseconomies of Scale

Increases in cost per unit when output is expanded, often due to inefficiencies arising from becoming too large.

Certified Public Accountants

Professionals who have passed the CPA examination and met all other state certification requirements, authorized to provide accounting services to the public.

Diseconomies of Scale

A situation where, as a firm increases its production, the costs per unit increase.