Mountainburg Industries Has Developed Two New Products but Has Only

question 141

Multiple Choice

Mountainburg Industries has developed two new products but has only enough plant capacity to introduce one product during the current year. The following data will assist management in deciding which product should be selected. $\begin{array}{lrrrr}&\text { Product L } &\text { Product W}\\\text { Direct materials } & \$ 44 & \$ 36 \\\text { Machining labor (\$12hour) } &18 & 15 \\\text { Assembly labor (\$10/hour) } & 30 & 10 \\\text { Variable overhead (\$8/hour) } & 36 & 18 \\\text { Fixed overhead (4/hour) } & 18 & 9\\ \text { Total Manufacturing Cost } &\$ 146 &\$ 88 \\ \text { Estimated selling } \mathrm{p} & \$170 &\$100 \\\text { Actual research and development costs } & \$ 240,000 & \$ 175,000 \\ \text { Estimated advertising costs } & \$ 500,000 & \$ 350,000 \\\end{array}$ Mountainburg's fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to individual products.
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Direct material costs for Mountainburg's two new products are

• A) Prime costs.
• B) Conversion costs.
• C) Opportunity costs.
• D) Period costs.

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Definitions:

Ecological Fallacy

The error of assuming that information about group characteristics can be used to make inferences about individuals within that group.

Cultural Appropriateness

The extent to which behaviors, attitudes, or policies are sensitive and suitable to the culture of a particular group or community.

Tariffs

Taxes imposed on imported goods and services, which can affect trade relations and economic policies between countries.

Transnational Corporations

Large companies that operate and have assets in more than one country, functioning with a global perspective.