The Firm That Makes a Key Component of the IPhone

question 29

Multiple Choice

The firm that makes a key component of the iPhone outsources production of it to India and Taiwan because

• A) although the firm did not want to do this, Apple Computer insisted.
• B) economies of scale neglect the human costs of capital transitions.
• C) the part can be made cheaply, and the firm spends the savings on research and development.
• D) it seeks to eliminate jobs in its home state.

---

Definitions:

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected variable overhead based on standard cost.

Materials Price Variance

The difference between the actual cost of raw materials and the standard or expected cost, multiplied by the quantity of materials purchased.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected (or budgeted) variable overhead based on a standard rate.

Labor Efficiency Variance

measures the difference between the actual labor hours used and the standard labor hours expected for the production achieved, indicating labor efficiency.