Table 3-2 Assume That Aruba and Iceland Can Switch Between Producing Coolers

question 407

Multiple Choice

Table 3-2
Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate.

-Refer to Table 3-2.Aruba should specialize in the production of

• A) coolers and Iceland should specialize in the production of radios.
• B) radios and Iceland should specialize in the production of coolers.
• C) both goods and Iceland should specialize in the production of neither good.
• D) neither good and Iceland should specialize in the production of both goods.

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Definitions:

Budgeted Activity

Planned or expected levels of operational activity, which may include sales volume, production quantities, or labor hours, for budgeting purposes.

Fixed Overhead

Costs that do not change with the level of production or sales over a short period, such as rent, salaries, and insurance.

Budget Variance

The difference between what was budgeted or planned in terms of financial performance or cost, and what was actually achieved.

Labor Efficiency Variance

The difference between the actual labor hours used and the standard hours expected for the level of production achieved.