What Would Happen to the Budget Line If Income Increases

question 16

Multiple Choice

What would happen to the budget line if income increases by the same percentage as the price of the two goods decreases (that is income up by, say, 10 percent and the prices down by 10 percent) ?

• A)A rightward parallel shift in the budget line
• B)A leftward parallel shift in the budget line
• C)An upward pivot of the budget line
• D)The budget line is unaffected

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Definitions:

Activity Rates

Metrics used in activity-based costing to allocate costs to products or services, based on activities that drive costs instead of traditional cost drivers like direct labor hours.

Factory Overhead Budget

A factory overhead budget estimates the total costs of all indirect manufacturing expenses expected during a specific period.

Direct Labor Hours

The total time workers spend directly manufacturing a product or providing a service, used in costing and operational efficiency analysis.

Fabrication Department

A division within a manufacturing facility where raw materials are assembled or processed into finished goods.