Scott and Cindy Both Produce Only Pizza and Tacos

question 32

Multiple Choice

Scott and Cindy both produce only pizza and tacos. In one hour, Scott can produce 20 pizzas or 40 tacos. In one hour, Cindy can produce 30 pizzas or 40 tacos. Based on these data,

• A) Cindy has a comparative advantage in producing tacos.
• B) Scott has a comparative advantage in producing tacos.
• C) neither Cindy nor Scott has a comparative advantage in producing tacos.
• D) Cindy and Scott have the same comparative advantage in producing tacos.
• E) Cindy and Scott have the same comparative advantage in producing pizzas.

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Definitions:

Costing

The process of determining the cost associated with a product or service.

Absorption Costing

A strategy for calculating the cost of a product by encompassing all associated manufacturing costs, covering direct materials, direct labor, and overheads, both variable and fixed.

Variable Costing

A costing method in accounting that only considers variable costs, which change with the level of output, in the determination of the cost of goods sold or manufacturing costs.

Fixed Production Cost

Costs that do not vary with the level of production, such as rent, insurance, and salaries of permanent staff.