Table 12-4 Table 12-4 Shows the Short-Run Cost Data of a Perfectly

question 292

Multiple Choice

Table 12-4

Table 12-4 shows the short-run cost data of a perfectly competitive firm. Assume that output can only be increased in batches of 20 units.
-Refer to Table 12-4.If the market price is $45, the firm

• A)will earn a profit of $3,600.
• B)will suffer a loss of $200.
• C)will break even.
• D)will earn profit of $1,040.

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Definitions:

Materials Quantity Variance

The difference between the actual and standard quantity of materials used times the standard price.

Materials Price Variance

The difference between the actual price and standard price of raw materials times the actual quantity used or purchased.

Direct Materials Price Variance

The difference between the actual cost and standard cost of materials used in production.

Direct Materials Quantity Variance

The difference between the actual quantity of direct materials used in production and the standard quantity expected, multiplied by the standard cost per unit.