Assume Manfred's Shoe Shine Parlor Hires Labor, Its Only Variable

question 131

Multiple Choice

Assume Manfred's Shoe Shine Parlor hires labor, its only variable input, under purely competitive conditions. Shoe shines are also sold competitively. How many units of output are produced when 2 workers are employed?

• A)4
• B)16
• C)24
• D)10

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Definitions:

Absorption Costing

An accounting method that captures all of the manufacturing costs (both fixed and variable) in the cost of a product.

Variable Costing

A costing method in which only variable production costs are assigned to inventory and cost of goods sold, excluding fixed manufacturing overhead.

Absorption Costing

A method of product costing that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead.

Unit Product Cost

The total cost incurred to produce, store, and sell one unit of a product, including direct materials, labor, and overhead.