-Silvio's Pizza Is a Small Pizzeria

question 373

Multiple Choice

-Silvio's Pizza is a small pizzeria. The firm's production function is shown in the table above. Suppose that Silvio's costs include only the cost of renting ovens, which is $100 per oven per week, the labor cost, $280 per worker per week, and the opportunity cost of Silvio's entrepreneurship, $1,000 per week. Suppose Silvio's uses Plant 1 and hires 3 workers. What is the firm's average fixed cost?

• A) $4.33
• B) $8.40
• C) $19.40
• D) $11.00

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Definitions:

Direct Labor-Hours

The total number of labor hours worked by employees who are directly involved in the manufacturing process.

General Factory

An umbrella term referring to the physical location where manufacturing operations occur, encompassing all areas of production.

Activity Rate

A rate used in activity-based costing to allocate overhead costs to products or services, based on their consumption of activities.

Activity-Based Costing

An accounting method that assigns costs to products or services based on the activities required to produce or deliver them, providing more accurate product costing.