Linus Has Utility Function U(x, Y) = X + 2y

question 10

True/False

Linus has utility function U(x, y) = x + 2y. If the price of x is $1 and the price of y is .50 cents then Linus must consume equal amounts of both goods in order to maximize his utility.

Understand how fixed and variable expenses affect a company’s profitability and break-even point.

Calculate the degree of operating leverage and interpret its effects on a company’s operating income.

Assess the impact of changes in variable costs and sales volume on net operating income.

Determine the margin of safety in both dollar terms and as a percentage.

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Definitions:

Efficiency Variances

The differences between the actual inputs used in production and the standard inputs, reflecting production efficiency.

Skill Levels

Skill levels refer to the degrees of competence or expertise in specific areas or tasks, often influencing job responsibilities and wage rates.

Direct Materials Price Variance

The difference between the actual cost of direct materials purchased and the expected (or standard) cost, impacting the overall cost of goods sold.

Direct Materials Quantity Variance

The difference between the actual quantity of materials used in production and the standard amount expected to be used, multiplied by the standard cost of those materials.