Constant Returns to Scale Means That Long-Run

question 96

Multiple Choice

Constant returns to scale means that long-run:

• A) ATC increases as output increases.
• B) ATC decreases as output decreases.
• C) ATC rises and then falls as output increases.
• D) ATC does not change as output increases.

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Definitions:

Departmental Overhead Rate

This is a method of allocating overhead costs to specific departments based on their respective proportions of an allocation base, such as machine hours or labor hours.

Activity-based Costing

A costing method that assigns overhead and indirect costs to specific activities, providing a more accurate product cost.

Overhead Cost Allocation

The process of distributing indirect costs to various cost objects like products, projects, or departments.

Activity-based Costing

A method in costing that allocates overhead and indirect costs to specific activities, providing a more accurate representation of the cost to produce a product or service.