Suppose That You Own Two Farms on Which to Grow

question 16

Multiple Choice

Suppose that you own two farms on which to grow corn. Inorder to lower the cost of production, you determine toincrease production on Farm 1 and reduce it on Farm 2. Thisimplies that the marginal cost of production on Farm 1 is:

• A)greater than the marginal cost of production on Farm 2.
• B)less than the marginal cost of production on Farm 2.(True Answer )Correct
• C)equal to the marginal cost of production on Farm 2.
• D)The difference of the marginal costs between the two farms cannot be determined.

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Definitions:

Customizing Department

A department within a manufacturing or service firm dedicated to modifying products or services according to customer specifications.

Job T898

A specific reference or identifier for a job or order within a job-order costing system, used for tracking costs and production progress.

Predetermined Overhead Rate

A rate calculated before a production period that estimates the amount of manufacturing overhead cost per unit of allocation base, used to apply overhead costs to goods produced.

Casting Department

A specific section within a manufacturing facility where the process of casting—shaping material by pouring it into a mold and allowing it to solidify—is performed.