A Worker Earns $15 Per Hour at a Plant in China

question 132

True/False

A worker earns $15 per hour at a plant in China and is told that only 2.5% of all workers make a higher wage. If the wage is assumed to be normally distributed and the standard deviation of wage rates is $5 per hour, the average wage for the plant is $7.50 per hour.

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Definitions:

Direct Materials

Raw materials that are directly traceable and allocable to a finished product in the manufacturing process.

Direct Labor-Hours

A unit of measure for the time workers spend producing goods or services, indicative of the labor cost attributed per hour.

Variable Overhead

Costs that vary with production volume, such as utilities or materials, as opposed to fixed overhead costs.

Direct Materials

Raw materials that can be directly attributed to the production process of specific goods or services.