The Following Table Shows the Marginal Products of Capital (K)and

question 127

Multiple Choice

The following table shows the marginal products of capital (K) and labour (L) for various methods for Firm ABC to produce 1000 toys per day. $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Production } \\\text { Method }\end{array} & \text { MPK } _ { K } & \text { MP}_{L } \\\hline \text { A } & 50 & 4 \\\hline \text { B } & 45 & 8 \\\hline \text { C } & 40 & 12 \\\hline \text { D } & 35 & 16 \\\hline \text { E } & 30 & 20 \\\hline \text { F } & 25 & 24 \\\hline \text { G } & 20 & 28 \\\hline\end{array}$$ TABLE 8- 2
-Refer to Table 8- 2.Suppose capital costs $80 per unit and labour costs $24 per unit.Which production method minimizes the cost of producing 1000 toys per day.

• A)method F
• B)method D
• C)method E
• D)method B
• E)method C

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Definitions:

Overapplied Manufacturing Overhead

A situation where the allocated manufacturing overhead costs exceed the actual overhead costs incurred; this leads to an adjustment in cost accounting records.

Work in Process

Goods in various stages of completion throughout the factory, not yet ready for sale, comprising direct labor, material, and manufacturing overhead.

Overapplied Manufacturing Overhead

This occurs when the allocated manufacturing overhead costs are more than the actual overhead costs incurred.

Underapplied Manufacturing Overhead

This occurs when the allocated cost for manufacturing overhead is less than the actual overhead costs incurred, indicating a shortfall in cost coverage.