A Technological Improvement Lowers the Cost of Producing Corn

question 104

Multiple Choice

A technological improvement lowers the cost of producing corn. As a result, the price of a kilogram of corn ________ and the quantity of corn ________.

• A) falls; decreases
• B) rises; decreases
• C) falls; increases
• D) falls; does not change
• E) rises; increases

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Definitions:

Direct Materials

Raw materials directly used in the manufacturing of a product, easily traceable to the finished good.

Total Cost

The complete cost of producing goods or services, including fixed and variable costs.

Predetermined Overhead Rate

The rate used to allocate overhead costs to products or cost objects, determined at the beginning of the accounting period.

Factory Overhead

Refers to indirect manufacturing expenses including the costs of operating the factory that are not directly tied to individual products.