Absolute Advantage Is

question 47

Multiple Choice

Absolute advantage is

• A) the ability to produce more output from given inputs than another producer can.
• B) the ability to produce a good at a lower opportunity cost than other producers.
• C) is always a relative concept.
• D) the ability to produce all goods at lower costs than anyone else can.

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Definitions:

Variable Costing

An accounting method that only includes variable production costs—direct materials, direct labor, and variable manufacturing overhead—in product costs.

Absorption Costing

A product costing technique that adds up all manufacturing expenses — direct materials, direct labor, variable, and fixed overheads — into the comprehensive cost of the product.

Net Operating Income

The total profit of a company after operating expenses are subtracted from operating revenues.

Variable Costing

A costing method in which all variable manufacturing costs (direct materials, direct labor, and variable manufacturing overhead) are treated as product costs, while fixed overhead is treated as a period cost.