When Moving Along the Production Possibilities Frontier, Opportunity Cost Is

question 23

Multiple Choice

When moving along the production possibilities frontier, opportunity cost is measured as the

• A) increase in the quantity produced of one good divided by the decrease in the quantity produced of another good.
• B) decrease in the quantity produced of one good divided by the increase in the quantity produced of another good.
• C) quantity produced of one good divided by the quantity produced of another good.
• D) quantity produced of one good multiplied by the quantity produced of another good.

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Definitions:

Sales Variance

Captures the effect of quantity sold holding the mix of products sold constant.

Overhead Variances

The difference between actual overhead costs incurred and the standard or budgeted overhead costs.

Variable Overhead

The indirect expenses that fluctuate with the level of production activity, such as utilities for the manufacturing plant.

Overhead Absorption Rate

Budgeted overhead divided by budgeted volume. Also called overhead application rate.