When a Firm Does More of Something, It Gets Better

question 244

Multiple Choice

When a firm does more of something, it gets better at it. This learning-by-doing is

• A)a source of diseconomies of scale.
• B)a source of economies of scale.
• C)called the principle of natural progression.
• D)called "spreading the overhead."

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Definitions:

Variable Costing

A method of costing that includes only variable production costs in product costs, treating fixed manufacturing overhead as a period cost to be charged against revenue in the period incurred.

Absorption Costing

A strategy in accounting that involves incorporating costs related to manufacturing, including direct materials, direct labor, and variable and fixed overheads, into the price point of a product.

Production Cost

The total expense incurred in manufacturing a product, including materials, labor, and overhead.

Absorption Costing

A costing method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead in the cost of a product.