Magnum Co Has Provided the Following Information for Last Year

question 54

Multiple Choice

Magnum Co. has provided the following information for last year:
$\begin{array}{ccc}\text { Gallons input } &20,000 & \text { @ \$15/gallon }\\\text { Labor costs }&???\\ \text { verhead costs } &\$250,000 & \\ \text { Jallons finished } &16,000 &\text { @ selling price of } \$ 55 / \text { gallor } \\ \text { tal factor productivity } & 1.173 & \\\end{array}$


The total labor cost (rounded) is:

• A) $293,325.
• B) $482,500.
• C) $468,750.
• D) $200,021.

---

Definitions:

Self-Serving Bias

The common human tendency to attribute positive events to one's own character but attribute negative events to external factors.

Endowment Effect

The tendency people have to place higher valuations on items they possess (are endowed with) than on identical items that they do not possess; perhaps caused by loss aversion.

Time Inconsistency

The tendency of certain conditions or decisions to change over time, especially in the context of economic planning and policy-making.

Prospect Theory

A behavioral economics theory of preferences having three main features: (1) people evaluate options on the basis of whether they generate gains or losses relative to the status quo; (2) gains are subject to diminishing marginal utility, while losses are subject to diminishing marginal disutility; and (3) people are prone to loss aversion.