Al's Donuts Produces About 600 Dozen Doughnuts Daily

question 179

Multiple Choice

Al's Donuts produces about 600 dozen doughnuts daily. If flour prices increase 20 percent

• A) only marginal cost will shift up.
• B) only marginal cost and average total cost will shift up.
• C) marginal cost, average variable cost, and average total cost will shift up.
• D) marginal cost, average total cost, and average fixed cost will shift up.

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Definitions:

Manufacturing Overhead

Refers to the indirect factory-related costs incurred when producing a product, which may include the cost of materials, labor, and utility expenses that are not directly tied to the production of goods.

Predetermined Overhead Rate

A rate used to allocate indirect costs to products or services, based on estimated overhead costs and an allocation base.

Direct Labor-hours

The sum of time spent by employees directly involved in the creation of a product, often used to allocate manufacturing costs.

Manufacturing Overhead

All indirect costs associated with the production process, including utilities, maintenance, and salaries of non-direct labor.