In the Short Run, as Output Increases

question 216

Multiple Choice

In the short run, as output increases,

• A) the difference between average total cost and average variable cost decreases.
• B) the difference between total cost and average variable cost decreases.
• C) marginal cost eventually decreases.
• D) All of the above are correct.

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Definitions:

Labor Efficiency Variance

The difference between the actual hours worked and the standard hours expected to produce a certain amount of goods, multiplied by the standard labor rate, indicating efficiency in labor use.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead incurred and the standard cost allocated, based on the actual production volume.

Materials Quantity Variance

A financial measure that captures the difference between the actual amount of materials used in production and the standard amount expected, multiplied by the standard cost of those materials.

Variable Overhead Rate Variance

The difference between the actual overhead rate incurred and the standard overhead rate that was expected, multiplied by the actual hours worked.