Suppose That Romeo in Problem 8 Has the Utility Function

question 24

Multiple Choice

Suppose that Romeo in Problem 8 has the utility function U = S⁵_RS²_J and Juliet has the utility function U = S²_RS⁵_J, where S_R is Romeo's spaghetti consumption and S_J is Juliet's. They have 70 units of spaghetti to divide between them.

• A) Romeo and Juliet would never disagree about how to divide the spaghetti.
• B) Romeo would want to give Juliet some spaghetti if he has more than 46 units of spaghetti.
• C) Romeo would want to give Juliet some spaghetti if he had more than 35 units of spaghetti.
• D) Juliet would want to give Romeo some spaghetti if she has more than 48 units.
• E) Juliet would want to give Romeo some spaghetti if she has more than 50 units of spaghetti.

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Definitions:

Plantwide Overhead Rate

A single overhead absorption rate used throughout an entire manufacturing plant.

Overhead Allocations

The process of assigning indirect costs to different cost objects such as products, services, or departments.

Activity-based Costing

A costing methodology that assigns indirect costs to products or services based on the activities that drive those costs, aimed at providing more accurate product costing.

Product Costs

The total costs incurred to create a product, including direct labor, materials, and overhead.