(See Problem 2

question 9

Multiple Choice

(See Problem 2.) Robinson Crusoe has exactly 8 hours per day to spend gathering coconuts or catching fish. He can catch 2 fish per hour or he can pick 8 coconuts per hour. His utility function is U(F, C) = FC, where F is his consumption of fish and C is his consumption of coconuts. If he allocates his time in the best possible way between catching fish and picking coconuts, his consumption will be the same as it would be if he could buy fish and coconuts in a competitive market where the price of coconuts is $1, his income is

• A) $64 and the price of fish is $4.
• B) $64 and the price of fish is $.50.
• C) $16 and the price of fish is $2.
• D) $80 and the price of fish is $2.
• E) $40 and the price of fish is $.50.

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Definitions:

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including utilities, maintenance, and salaried staff, not directly linked to the production of goods.

Applied Overhead

Applied overhead refers to the estimated amount of overhead costs allocated to particular cost objects based on a predetermined rate, used to assign indirect costs to products or services.

Variance Measured

The process of determining the difference between expected and actual performance, costs, or revenues for the purpose of financial analysis and control.

Variable Overhead

Overhead costs that fluctuate with the level of production output, such as utilities for machinery or costs for raw materials.