Reference: Ref 17-4 (Table: Abracadabra Processors Ltd

question 139

Essay

Reference: Ref 17-4 (Table: Abracadabra Processors Ltd.) Refer to the table. Each computer chip produced sells for $350. How many people will the company hire to make the computer chips if the salary is $45,000 per worker per year?

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Definitions:

Fixed Overhead

Expenses that do not vary with the level of production or sales, including rent, salaries, and insurance costs.

Period Cost

Costs that are not directly tied to the production process and are instead expensed in the period they are incurred, such as selling, administrative, and other expenses.

Manufacturing Costs

The total expenses involved in making a product, including direct materials, direct labor, and factory overhead.

Absorption Costing

An accounting method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in the cost of a product.