The Figure Below Shows the Isocost Lines Facing a Firm

question 49

Multiple Choice

The figure below shows the isocost lines facing a firm producing golf tees.
FIGURE 8-5
-Refer to Figure 8-5. The firm that is facing the isocost lines as shown will minimize its cost of production of any given output level if it employs capital and labour such that the ratio of the marginal product of labour to the marginal product of capital MPL/MPK) is equal to

• A) 5/2.
• B) 5.
• C) 2.
• D) 2/5.
• E) Not able to determine from the information provided.

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Definitions:

Variable Overhead Cost Variance

The difference between the actual variable overhead costs incurred and the expected (or standard) costs, based on the actual level of activity.

Fixed Overhead Cost Variance

The difference between the actual fixed overhead costs incurred and the expected (or budgeted) fixed overhead costs.

Variable Overhead Efficiency Variance

A calculation that shows the cost impact of the difference between the actual and expected efficiency in using variable overhead resources in production.

Relevant Information

Data that can influence a decision-making process because it is pertinent and has a bearing on the situation.