Assume That the Quantity of CDs Is Measured on the Horizontal

question 25

Multiple Choice

Assume that the quantity of CDs is measured on the horizontal axis, while the quantity of movie tickets is measured on the vertical axis. If available income decreases, then the new budget line:

• A) will have a smaller horizontal intercept, while keeping the same vertical intercept.
• B) will have a smaller vertical intercept, while keeping the same horizontal intercept.
• C) will have a smaller vertical and horizontal intercept.
• D) will have a bigger vertical and horizontal intercept.

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Definitions:

Predetermined Overhead Rate

An estimated overhead rate used to assign expected overhead costs to individual units of production, aiding in budgeting and cost control.

Fixed Manufacturing Expenses

Costs that do not vary with the level of production, such as rent, salaries, and equipment depreciation.

Selling and Administrative Expenses

Expenses related to the sale of products or services and the general administration of a business, excluding production costs.

Fixed Manufacturing Overhead

The portion of manufacturing overhead costs that remain constant regardless of the level of production, such as depreciation on factory equipment or salaries of factory supervisors.