Suppose That Philip Is the Best Contractor in Town, and He

question 493

Multiple Choice

Suppose that Philip is the best contractor in town, and he makes $400,000 a year. Suppose that Julia Roberts is the best and highest paid actress in Hollywood, and she makes $13 million per movie. Both are the best in their respective fields of work. One reason for the significant difference in incomes has to do with the nature of the service each offers. Philip's contracting services

• A)can be provided to an unlimited number of customers in a year, but Julia's work is sold to only a few individuals in a year.
• B)can only be provided to a limited number of customers in a year, but Julia's work is sold to millions of individuals in a year - i.e., to anyone who has the willingness and ability to pay for admission to her movies.
• C)can be provided to a unlimited number of customers in a year, and Julia's work is sold to millions of individuals in a year - i.e., to anyone who has the willingness and ability to pay for admission to her movies.
• D)can only be provided to a limited number of customers in a year, and Julia's work is sold to only a few individuals in a year.

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Definitions:

Variable Costing

A costing method that includes only variable costs—direct materials, direct labor, and variable manufacturing overhead—in the cost of a unit of product, excluding fixed overhead costs.

Absorption Costing

Absorption Costing is a method of inventory costing that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Inventory Decreases

A reduction in the quantity of goods or materials held in stock, which can impact production, sales, and the overall financial health of a business.

Variable Costing

An accounting method that includes only variable costs (direct materials, direct labor, and variable manufacturing overhead) in the cost of goods sold and inventory valuation.