Table 3-7 Assume That Japan and Korea Can Switch Between Producing Cars

question 20

Multiple Choice

Table 3-7
Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate.

-Refer to Table 3-7.Suppose Japan decides to increase its production of cars by 45.What is the opportunity cost of this decision?

• A) 9 airplanes
• B) 15 airplanes
• C) 135 airplanes
• D) 225 airplanes

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Definitions:

Variable Component

The part of a cost or expense that varies directly with the level of activity or production volume, in contrast to fixed costs.

Electrical Motor

An electromechanical device that converts electrical energy into mechanical energy, commonly used in various appliances, machinery, and vehicles.

Labor-Hour

A unit of measure representing an hour of work performed by an employee.

Fixed Overhead Volume Variance

The difference between the expected fixed overhead costs based on standard volume and the actual fixed overhead incurred.