Assume It Takes 10 Units of Labor to Produce 4

question 270

Multiple Choice

Assume it takes 10 units of labor to produce 4 units of output. When the price of labor is $6 per unit and fixed costs equal $60, what is the total cost of those 4 units of output?

• A) $60
• B) $70
• C) $120
• D) $84

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Definitions:

Operating Assets

Cash, accounts receivable, inventory, plant and equipment, and all other assets held for operating purposes.

Payback Period

The length of time required for an investment to recover its initial outlay in terms of profits or savings.

Operating Costs

Expenses associated with the daily operations of a business, including rent, utilities, and payroll, but excluding costs directly related to production.

Working Capital Investment

The funds invested in a company's short-term assets like inventory and receivables minus short-term liabilities, facilitating day-to-day operations.