A Publishing House Is Using 400 Printers and 200 Printing

question 71

Multiple Choice

A publishing house is using 400 printers and 200 printing presses to produce books. The printers' wage rate is $20 and the price of a printing press is $100. The last printer added 20 books to total output, while the last press added 50 books to total output. In order to maximize the number of books published with a budget of $28,000, the publishing house

• A) should continue to use 400 printers and 200 presses.
• B) should use more printers and fewer presses because printers cost less than presses.
• C) should use more printers and fewer presses because the last dollar spent on a printer yielded more output than the last dollar spent on a press.
• D) should use more presses and fewer printers because the marginal output of the last press was more than the marginal output of the last printer.
• E) should use more presses and fewer printers because the last dollar spent on a press yielded more output than the last dollar spent on a printer.

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Definitions:

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products, calculated based on estimated costs and activity levels.

Predetermined Overhead Rate

An estimated rate used to apply manufacturing overhead to products or job orders, based on expected activity levels.

Manufacturing Overhead

Expenses tied to the production process that do not include direct labor or materials are known as indirect costs.

Variable Costs

Variable costs are expenses that vary directly with the level of production or sales volume, such as materials and labor.