Two Buns Burger Joint Is Weighing Three Capacity Expansion Alternatives

question 5

Short Answer

Two Buns burger joint is weighing three capacity expansion alternatives: small, medium, and large shops. Whatever capacity choice is made, the market conditions for the burgers can be described as "moderate" or "strong." The probability of a moderate market situation is estimated to be 40 percent; and a strong market situation has a probability of 60 percent. The payoffs are as follows.
$$\begin{array} { | l | c | c | } \hline & \text { Moderate Market Conditions } & \text { Strong Market Conditions } \\\hline \text { Small shop } & \$ 25,000 & \$ 50,000 \\\hline \text { Medium shop } & \$ 20,000 & \$ 70,000 \\\hline \text { Large shop } & - \$ 5,000 & \$ 90,000 \\\hline\end{array}$$ Which capacity choice should the company make?

Learning the components and utilization of job cost sheets in tracking and accumulating product costs.

Examining the impact of job-order costing system features on the accuracy and application of overhead costs.

Distinguishing between actual and applied overhead costs and the significance of the predetermined overhead rate formula.

Differentiating between absorption costing and job-order costing in terms of cost assignment to product units.

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