Ms Liebowitz Has a Choice of Driving or Flying from Morgantown

question 50

Multiple Choice

Ms. Liebowitz has a choice of driving or flying from Morgantown, West Virginia to Washington, D.C. for a one-day business trip. If she travels by air, she will be able to work seven hours in D.C., while if she drives, she will only have time to work four hours once there. Her expected income from each hour of work in D.C. is $40. If Ms. Liebowitz is a rational decision maker, she will chose to fly if and only if the price differential (air cost minus driving cost) is less than

• A) $40.
• B) $120.
• C) $160.
• D) $280.

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Definitions:

Direct Labour Standard

The benchmark or norm for the amount of labor time that is considered necessary to produce a unit of product under standard operating conditions.

Machine Breakdown

A failure or malfunction of machinery which leads to production halting and potential delays in operations.

Budgeted Output

The anticipated quantity of goods or services a company plans to produce in a specified period, usually tied to budgeting and planning processes.

Standard Cost

A predetermined or estimated cost of producing a product or service, used as a benchmark for measuring actual production costs.