Dave Can Make a Birdhouse in Two Hours

question 165

True/False

Dave can make a birdhouse in two hours. He can make a bird feeder in two hours. The opportunity cost to Dave of making a birdhouse is 1/2 bird feeder.

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Definitions:

Contribution Margin

The difference between the sales revenue of a product and its variable costs, indicating how much contributes to covering fixed costs and generating profit.

Variable Expenses

Costs or expenses that change in proportion to business activity levels or volume, such as sales commissions or raw material costs.

Traceable Fixed Expenses

Fixed costs directly associated with specific business segments, which would be eliminated if the segment was discontinued.

Net Operating Income

The amount of income generated from regular business operations after subtracting operating expenses but before taxes and interest.