Your Friend Is Preparing for This Exam and in Your

question 453

Essay

Your friend is preparing for this exam and in your practice session makes the following statement: "Instead of attending microeconomics class for two hours, Kiki could have played tennis or watched a movie. Therefore, the opportunity cost of attending class is the tennis and the movie she had to give up." Is your friend's analysis correct or not? Explain your answer.

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Definitions:

Quantity Standard

A predetermined measure of the quantity of inputs expected to be used in the production of goods or services, used for budgeting and performance evaluation.

Standard Cost System

An accounting system that uses predetermined costs for products and services to help managers control costs by comparing them with actual costs.

Raw Materials

The basic materials and components required to start the production process.

Standard Cost Card

A detailed listing of the standard amounts of inputs and their costs that are required to produce a unit of a specific product.