Scenario: Mark Can Make Three Tables and One Chair in a Day

question 184

Multiple Choice

Scenario: Mark can make three tables and one chair in a day, while John can make four tables and one chair in a day.
-Refer to the scenario above.Which of the following is true in this case?

• A) John should specialize in making tables, because he has a lower opportunity cost of producing them.
• B) John should specialize in making chairs, because he has a lower opportunity cost of producing them.
• C) John should specialize in making tables, because he has a greater opportunity cost of producing them.
• D) John should specialize in making chairs, because he has a greater opportunity cost of producing them.

---

Definitions:

Predetermined Fixed Overhead Rate

A rate estimated at the beginning of an accounting period to allocate fixed overhead costs to products or services based on a defined activity base.

Cost Of Goods Manufactured

The total production cost of goods completed and made ready for sale during a specific period.

Work In Process Inventory

Goods in the manufacturing process that are not yet complete, representing a portion of inventory on a company's balance sheet.

Overapplied Manufacturing Overhead

A situation where the allocated manufacturing overhead cost exceeds the actual manufacturing overhead expenses incurred.