The Cost Effectiveness Ratio for the Current Level of the Activity

question 21

Multiple Choice

The cost effectiveness ratio for the current level of the activity below is


$\begin{array}{|l|c|c|}\hline & \text { Total Avoided Infections } & \text { Total Cost } \\\hline \text { Minimal } & 1,00025 \% & \$ 20,00020 \% 1.25 \\\hline \text { Reduced } & 2,00050 \%+25 \% & \$ 45,00045 \%+25 \% 1.00 \\\hline \text { Current } & 4,000100 \%+50 \% & \$ 100,000100 \%+55 \% 0.91 \\\hline \text { Expanded } & 8,000200 \%+100 \% & \$ 250,000250 \%+150 \% 0.67 \\\hline\end{array}$

• A) 1.25
• B) 1.00
• C) 0.91
• D) 0.67
• E) 0.40

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Definitions:

Variable Overhead

Indirect manufacturing costs that vary with the level of production activity, such as utilities for the manufacturing plant.

Direct Labor-hours

The total hours worked by employees directly involved in manufacturing a product, often used as a basis for allocating labor costs to products.

Raw Material

Basic substances in their natural, modified, or semi-processed states used as inputs for production processes to manufacture finished goods.

Materials Price Variance

The deviation between the actual and standard cost of materials used in production.