Kelly, Who Grows Geraniums to Sell, Is Currently Producing a Level

question 121

Multiple Choice

Kelly, who grows geraniums to sell, is currently producing a level of output at which her marginal cost equals her average variable cost. Which of the following best describes Kelly's average variable cost at this level of output?

• A) It is greater than the average total cost.
• B) It is neither at its maximum nor its minimum.
• C) It is at a maximum.
• D) It is at a minimum.

---

Definitions:

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including utilities, maintenance, and salaries of managers.

Cost of Goods Sold

The total cost associated with making or acquiring any goods sold during a specific period, including materials and labor.

Overapplied

A situation in cost accounting where the allocated or applied manufacturing overhead costs exceed the actual overhead costs incurred.

Underapplied

A situation where the allocated manufacturing overhead cost is less than the actual overhead incurred.