A Farmer Uses Soil, Seeds, a Highly Skilled Foreman, Tractors

question 10

Multiple Choice

A farmer uses soil, seeds, a highly skilled foreman, tractors, and a barn to produce his harvest. Which factor of production are the tractors?

• A) labor
• B) human capital
• C) natural resources
• D) physical capital

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Definitions:

Direct Labor-Hours

The total hours worked by employees who are directly involved in the production process, often used to allocate manufacturing overhead.

Activity-Based Costing

A costing method that allocates overhead costs to products based on the activities required to produce them.

Manufacturing Overhead

includes all the indirect costs associated with the production process, such as utilities, maintenance, and factory equipment depreciation, which are not directly traceable to a specific product.

Traditional Costing System

A costing methodology that assigns manufacturing costs to products based on volume metrics such as direct labor hours or machine hours.