A Company Is Evaluating Which of Two Alternatives Should Be

question 68

Multiple Choice

A company is evaluating which of two alternatives should be used to produce a product that will sell for $35.00 per unit.The following cost information describes the two alternatives: For what level of volume (output) would the firm prefer Process A to Process B?

• A)for all volume levels greater than 75,000
• B)for all volume levels greater than 97,500
• C)for all volume levels greater than 117,500
• D)for all volume levels greater than 125,000

---

Definitions:

Fixed Costs

Constant expenses that a business incurs regardless of production volume, including leases and insurance, essential for financial planning and analysis.

Net Income

The total earnings of a company after subtracting all expenses, taxes, and losses.

Variable Costing Approach

An accounting method that considers only variable costs as product costs and all fixed costs as period costs, affecting inventory valuation and profitability.

Absorption Cost Approach

A costing method that includes all manufacturing costs — direct materials, direct labor, and both variable and fixed manufacturing overhead — in the cost of a product.