If Both the MU and MC of Flower Pots Is

question 18

Multiple Choice

If both the MU and MC of flower pots is $1.50 and the MU and MC of coffee cups is $2, then economic efficiency would require

• A)increased production of flower pots.
• B)increased production of coffee cups.
• C)the price of coffee cups to exceed the price of flower pots.
• D)the price of flower pots to exceed the price of coffee cups.

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Definitions:

Net Operating Income

The income generated from normal business operations, excluding expenses such as interest and taxes.

Common Fixed Expenses

Costs that do not vary with the level of production or sales over a certain period and are shared among different segments or products of the business.

Absorption Costing

This accounting approach incorporates every manufacturing expense, such as direct materials, direct labor, plus variable and fixed overhead costs, into the product's total cost.

Variable Costing

An accounting method that only includes variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs.