An Underallocation of Resources in an Industry Means That for the Last

question 19

Multiple Choice

An underallocation of resources in an industry means that for the last unit produced,

• A)economic profit is still rising.
• B)society places a higher value on the resources required to produce the last unit than the value society places on consuming the last unit.
• C)the demand price for the last unit exceeds the marginal cost of producing the last unit.
• D)the cost of producing the last unit exceeds its value to society.
• E)long-run average cost is falling.

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Definitions:

Machine-Hours

A measure of production activity that quantifies the number of hours machines are run in the manufacturing process.

Job-Order Costing System

An accounting system that accumulates costs by individual jobs or orders, used in manufacturing and service environments where each job is distinct.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products, calculated before the period begins based on an estimate of total overhead costs and an allocation base.

Manufacturing Departments

Specific sections within a manufacturing facility where distinct stages of the production process are carried out, such as assembly or painting.