Suppose That a Bakeshop with 5 Employees Can Produce Both

question 92

Multiple Choice

Suppose that a bakeshop with 5 employees can produce both pies and cakes.In one day,if all resources are devoted to baking pies,the shop can produce 125 pies; if all resources are devoted to baking cakes,the shop can produce 50.What is the shop's opportunity cost of producing any one pie?

• A)125 pies
• B)0.4 cakes
• C)2.5 pies
• D)0.4 pies
• E)50 cakes

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Definitions:

Process Costing System

A method of accounting that traces and accumulates direct costs, and allocates indirect costs of a manufacturing process, to products by averaging them over units of output.

Downstream Costs

Costs incurred after the production phase, such as distribution and marketing expenses, as well as after-sales service costs.

Upstream Costs

Expenses incurred in the early stages of the production process, which can include exploration, development, and extraction in the oil and gas industry.

Inventory Valuation

The method used to calculate the cost of goods sold and ending inventory value for financial reporting.