Ordering Materials, Setting Up Machines, Assembling Products, and Inspecting Products

question 120

Multiple Choice

Ordering materials, setting up machines, assembling products, and inspecting products are examples of

• A) cost drivers.
• B) overhead cost pools.
• C) direct labor costs.
• D) nonmanufacturing activities.

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Definitions:

Ceiling Price

A legally imposed maximum price that can be charged for a good or service, intended to prevent prices from becoming too high.

Allocative Efficiency

A condition of distributing resources where improving the situation of one person results in the detriment of another.

Economic Profits

The surplus remaining after deducting both the explicit and implicit costs from total revenues; represents extra earnings above the next best alternative.

Fair Return

The reasonable profit that a business can expect to make, considering the risk involved.