Life Lessons Provides Academic Enrichment and Review Activities for High

question 35

Multiple Choice

Life Lessons provides academic enrichment and review activities for high school students in 4 subject areas: English, mathematics, science, and history. In November 20x1, the firm's information system produced the following data: $\begin{array}{lllll}&\text { Number of}&\text { Number of }&\text {Percent of}&\text { Direct }\\&\text { Tutors } &\text { Students } &\text { Faculty } & \text { Costs }\\\text { English } & 4 & 20 & 10 \% & \$ 6,000 \\\text { Mathematics } & 3 & 24 & 25 & 8,000 \\\text { Science } & 5 & 15 & 50 & 12,000\\\text { History }& 2&8&15&3,000\end{array}$ Regardless of subject area, clients pay $50 per hour for tutoring services. Costs associated with the Life Lessons operations for November 20x1 included: $\begin{array}{lr}\text { Facility rent } & \$ 2,500 \\\text { Custodial services } & 1,800 \\\text { Utilities } & 600 \\\text { Computer equipment amortization } & 800 \\\text { Advertising } & 400\end{array}$
If the number of tutors in each area is the cost driver for custodial services, the total custodial services cost allocated to history would be:

• A) $450
• B) $270
• C) $257
• D) None of the above

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Definitions:

Opportunity Cost

The lost benefit that could have been enjoyed if the chosen option had not been taken, implying the trade-off of forgoing the next best alternative.

Efficient Production Process

A method of production that uses the least amount of resources to achieve the maximum output.

Resources And Technology

The combination of natural resources, human resources, and technology that firms use to produce goods and services.

Opportunity Cost

The cost of an alternative that must be forgone in order to pursue a certain action; the benefits you could have received by taking an alternative action.