Let the Production Function Be Q = ALᵃKᵇ

question 30

Multiple Choice

Let the production function be q = ALᵃKᵇ.The function exhibits increasing returns to scale if

• A) a + b = 1.
• B) a + b > 1.
• C) a + b < 1.
• D) Cannot be determined with the information given.

Understand how changes in activity measures affect costs in an ABC system.

Understand the fundamentals of activity-based costing (ABC) and its application in different business scenarios.

Apply activity-based costing to calculate the break-even price for products or services.

Identify the components and calculations involved in time-driven activity-based costing.

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Definitions:

Debiting

The process of recording an entry on the left side of the accounting ledger, indicating an increase in assets or expenses, or a decrease in liabilities, equity, or income.

Consuming Goods

Goods that are used by consumers and are typically expended when used, opposed to durable goods which are designed to last for a prolonged period.

Generating Revenues

Generating revenues refers to the process through which a business earns money by selling goods or providing services.

Expenses

Outflows or other using up of assets or incurrences of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity’s ongoing major operations.