Firms a and B Both Produce and Sell Computer Cables

question 49

Essay

Firms A and B both produce and sell computer cables.The sales price is $5 per cable.Data for both firms at a sales volume of 100 units are as follows: Required: Which firm's profit or loss is more sensitive to changes in sales volume? Explain.

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Definitions:

Underapplied

A situation where the assigned manufacturing overhead expenses fall short of the real overhead costs that have been spent.

Standard Labor-Hours

The predetermined amount of labor-hours expected to be required to produce a unit of product or perform a task.

Actual Output

The real production volume or amount of work done, as opposed to planned or theoretical outputs.

Manufacturing Overhead

Costs that are incurred in the manufacturing process other than direct materials and direct labor, such as utilities, depreciation, and maintenance of equipment.