In the Basic 45-Degree Line Model, What Is the Effect

question 66

Multiple Choice

In the basic 45-degree line model, what is the effect of an increase in the price level?

• A)There will be movement to the left on the expenditure line.
• B)There will be movement to the right on the expenditure line.
• C)The expenditure line will shift downward.
• D)The expenditure line will shift upward.

---

Definitions:

Direct Labor-Hour

A direct labor-hour is a unit of measurement for the amount of work performed by employees who are directly involved in the production of goods or services.

Fixed Manufacturing Overhead

The costs that do not vary with the level of production or sales, such as salaries of managers, rent of the factory, and depreciation of manufacturing equipment.

Predetermined Overhead Rate

A pre-determined rate utilized for attributing manufacturing overhead costs to products or job orders, which is established beforehand based on anticipated expenses and levels of activity.

Variable Manufacturing Overhead

consists of production costs that fluctuate with the level of output, such as utilities or materials used in the maintenance of equipment.