If the Product Derived from the Last Dollar Spent on Labor

question 46

Multiple Choice

If the product derived from the last dollar spent on labor is greater than the product derived from the last dollar spent on capital, then the firm

• A) is minimizing costs.
• B) should use more labor and less capital to minimize costs.
• C) should use less labor and more capital to minimize costs.
• D) should increase the price paid to labor and decrease the price paid to capital to minimize costs.

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Definitions:

FOB Shipping Point

A term used in shipping contracts to indicate that the buyer is responsible for the goods and shipping costs from the point of origin.

Perpetual Inventory System

An inventory tracking system that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.

Debit Memo

A document issued to record a reduction in the balance due from a customer, often due to a return or correction.

Gross Profit

The difference between revenue and the cost of goods sold before expenses.