A Firm Produces 300 Units of Output at a Total

question 38

Multiple Choice

A firm produces 300 units of output at a total cost of $1,000. If fixed costs are $100,

• A)average fixed cost is $10.
• B)average variable cost is $3.
• C)average total cost is $4.
• D)average total cost is $5.

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Definitions:

Overhead Allocation Methods

Techniques used to assign indirect costs to products, services, or departments, helping in accurately reflecting production costs.

Overhead Rate

Refers to the cost of running a business that cannot be directly attributed to a specific product or service, often expressed as a percentage of labor or material costs.

Activity-based Costing

A costing method that assigns overhead and indirect costs to specific activities, providing more accurate product costing.

Departmental Overhead Rate

A rate used to allocate overhead costs to specific departments, based on criteria like department size, expenditure, or machine hours used.