Scenario: Yasmin and Zeek Are Lawyers Working at V, W

question 159

Multiple Choice

Scenario: Yasmin and Zeek are lawyers working at V, W, and X LLP. Yasmin works 48 hours a week, and Zeek also works 48 hours a week. They handle two types of cases, intellectual property (IP) cases and corporate fraud (CF) cases. It takes Yasmin 6 hours to handle each IP case and 4 hours to handle each CF case. Zeek can finish an IP case in 3 hours and a CF case in 6 hours.
-Refer to the scenario above.Who has a comparative advantage in handling CF cases and why?

• A) Yasmin, because her opportunity cost of handling a CF case is a third of Zeek's
• B) Yasmin, because her opportunity cost of handling a CF case is half of Zeek's
• C) Zeek, because his opportunity cost of handling a CF case is a third of Yasmin's
• D) Zeek, because his opportunity cost of handling a CF case is half of Yasmin's

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Definitions:

Direct Labor-Hours

The total hours worked by employees who are directly involved in the production process, often used to allocate manufacturing overhead.

Activity-Based Costing

A costing method that allocates overhead costs to products based on the activities required to produce them.

Manufacturing Overhead

includes all the indirect costs associated with the production process, such as utilities, maintenance, and factory equipment depreciation, which are not directly traceable to a specific product.

Traditional Costing System

A costing methodology that assigns manufacturing costs to products based on volume metrics such as direct labor hours or machine hours.