(Table) the Amount of Labor and Corresponding Output Are Provided

question 49

Multiple Choice

(Table) The amount of labor and corresponding output are provided in the table. The price per unit of output is $11.50. The wage paid per day is $115. To maximize economic profit, how many people should the firm hire?
$\begin{array}{|c|c|}\hline \text { Labor } & \text { Output } \\\hline 0 & 0 \\\hline 1 & 7 \\\hline 2 & 19 \\\hline 3 & 34 \\\hline 4 & 47 \\\hline 5 & 57 \\\hline\end{array}$

• A) 2 workers
• B) 3 workers
• C) 4 workers
• D) 5 workers

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Definitions:

Overapplied Amount

This is an accounting term referring to a situation where the actual manufacturing overhead cost is less than the overhead cost applied to production, resulting in a surplus.

Factory Overhead

All indirect costs associated with manufacturing, including utilities, indirect labor, and materials not directly traceable to a product.

Machine Hours

A measure of the amount of time a machine is operated within a given period, used in cost accounting to allocate manufacturing overhead costs to products.

Overapplied Amount

A situation in cost accounting where the allocated factory overhead costs exceed the actual overhead costs incurred.