Reference: Ref 2-7 (Table: Production Possibilities for Italy and Belgium)

question 71

Multiple Choice

Reference: Ref 2-7 (Table: Production Possibilities for Italy and Belgium) According to the table on Production Possibilities for Italy and Belgium, the opportunity cost of 1 pound of pasta for Italy is:

• A) 2/5 pound of linen.
• B) 4 pounds of linen.
• C) 1/4 pound of linen.
• D) 2 hours of labor.

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Definitions:

Manufacturing Overhead

All indirect costs associated with manufacturing, such as maintenance, utilities, and management salaries, not directly tied to the production of goods.

Prime Cost

The combined direct costs of raw materials and labor that are directly attributable to the production of a product.

Direct Labor Cost

The wages paid to workers directly involved in production or service delivery, constituting a major component of a product's cost.

Variable Production

Production costs that vary in total directly and proportionately with changes in the production level.