When Economic Rent Exists

question 299

Multiple Choice

When economic rent exists

• A) the price is equal to the opportunity cost of the resources.
• B) price is the same as the discount rate.
• C) resources are allocated inefficiently.
• D) resources are allocated efficiently.

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Definitions:

Underapplied

A situation where the applied manufacturing overhead is less than the actual manufacturing overhead incurred, indicating that the costs have not been fully allocated.

Predetermined Overhead Rate

A rate calculated before the accounting period begins, used to allocate overhead costs to products or job orders based on a chosen activity base.

Direct Labor-Hours

The total hours worked by employees directly involved in the production of goods or provision of services.

Manufacturing Overhead

Any production expenses beyond direct labor and materials, which include overheads like equipment wear and tear, utilities, and rental fees.