Use the Following to Answer Questions

question 42

Multiple Choice

Use the following to answer questions:
Figure: Budget Constraint 2
-(Figure: Budget Constraint 2) Refer to the figure. What is the relative price of music downloads to movie downloads?

• A) 3
• B) 1/3
• C) 5
• D) 4

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Definitions:

Cost of Unused Capacity

The costs incurred for not utilizing production or service capacity to its fullest potential.

Period Expense

Costs that are not directly related to production and are charged as expenses in the period they occur.

Predetermined Overhead Rate

A rate calculated by dividing estimated overhead costs by an estimated activity base, used to allocate overhead costs to products or services.

Fixed Manufacturing Overhead

Costs that do not vary with the level of production or sales, such as rent, salaries, and equipment depreciation within a manufacturing plant.