An Upward-Sloping Long-Run Supply Curve Indicates a Constant-Cost Industry

question 172

True/False

An upward-sloping long-run supply curve indicates a constant-cost industry.

Determine the impact of changes in activity level on total and per unit fixed costs.

Identify cost drivers and their role in cost behavior.

Understand the definitions and behaviors of direct and indirect costs, as well as committed and discretionary fixed costs.

Distinguish between the concepts of gross margin, contribution margin, and net income.

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Definitions:

Predetermined Overhead Rate

This rate is calculated before the period begins and is used to apply manufacturing overhead costs to products based on a consistent formula.

Fixed Manufacturing Overhead

Costs in manufacturing that do not vary with the level of production, including factory rent, salaries of permanent staff, and equipment depreciation.

Machine-Hours

A measure of the amount of time machines are operated in the manufacturing process, used as a basis for allocating costs.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate manufacturing overhead costs to products based on a selected activity base such as labor hours or machine hours.