When a Company Is Considering Discontinuing Production of a Product

question 78

True/False

When a company is considering discontinuing production of a product, the salvage value of the production machinery would usually be relevant to the decision.

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Definitions:

Direct Material Cost

The cost of raw materials and components that are directly used in the production of a product.

Labor Quantity Variance

The difference between the actual hours worked and the standard hours allowed for the work performed, multiplied by the standard hourly wage rate.

Produced

The completed output of goods or services as a result of manufacturing or production processes.

Materials Price Variance

The difference between the actual cost of materials used in production and the expected (or standard) cost of those materials.