Given the Production Possibility Tables for First and Second Bakeries

question 51

Multiple Choice

Given the production possibility tables for First and Second Bakeries shown, we know that the opportunity cost of producing pies:

• A)is higher at First Bakery.
• B)is higher at Second Bakery.
• C)is the same at both bakeries.
• D)cannot be computed without further information.

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Definitions:

Fixed Expenses

Costs that do not change with the level of production or sales, such as rent and salaries.

Absorption Costing

A technique in accounting where all expenses from manufacturing, covering direct materials, direct labor, and overhead expenses variable and fixed, are included in the cost of a product.

Direct Materials

Raw materials that can be directly traced to the production of finished goods.

Fixed Costs

Expenses that do not change in total despite fluctuations in production levels or sales volume.