Mike and Sandy Are Two Woodworkers Who Both Make Tables

question 79

Multiple Choice

Mike and Sandy are two woodworkers who both make tables and chairs.In one month,Mike can make 4 tables or 20 chairs,where Sandy can make 6 tables or 18 chairs.Given this,we know that the opportunity cost of 1 table is

• A) 1/5 chair for Mike and 1/3 chair for Sandy.
• B) 1/5 chair for Mike and 3 chairs for Sandy.
• C) 5 chairs for Mike and 1/3 chair for Sandy.
• D) 5 chairs for Mike and 3 chairs for Sandy.

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Definitions:

Direct Method

An accounting method used to allocate service department costs directly to producing departments without considering services rendered between service departments.

Cost of Goods Sold

The immediate expenses directly related to the manufacture of products sold by a business, encompassing costs for materials, labor, and overhead.

Comparative Balance Sheet

A financial statement that presents the financial position of a company at two or more different points in time, side-by-side, to facilitate comparison.

Direct Method

An accounting approach where costs are directly traced to objects, such as products or services, without using cost drivers or allocation bases.