Roommates Sarah and Zoe Are Hosting a Halloween Party and Have

question 155

Essay

Roommates Sarah and Zoe are hosting a Halloween party and have to make food for their guests and costumes for themselves.To finish both tasks as quickly as possible, Sarah and Zoe know that each of them should focus on just one task, but they don't know who should do what.To decide which roommate should do the cooking, Sarah and Zoe should determine which roommate:
A.has the absolute advantage in cooking.
B.has the comparative advantage in cooking.
C.has the largest production possibility frontier in cooking.
D.can complete the cooking in the least amount of time.

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Definitions:

Degree of Operating Leverage

The degree of operating leverage is a financial ratio that measures the sensitivity of a company's operating income to its sales, indicating how earnings before interest and taxes are affected by sales volume.

Fixed Expenses

Costs that do not vary with the level or amount of goods or services produced or sold.

Contribution Margin

The difference between sales revenue and variable costs, used to cover fixed costs and profits.

Fixed Expenses

Expenses that remain constant regardless of the amount of output or sales within a brief timeframe, including lease payments, wages, and coverage fees.