To Produce 150 Units of Output, a Firm Must Use

question 152

Multiple Choice

To produce 150 units of output, a firm must use 3 employee-hours. To produce 300 units of output, the firm must use 8 employee-hours. Apparently, the firm is:

• A)producing in the long run.
• B)experiencing diminishing returns.
• C)not using any fixed factors of production.
• D)experiencing negative returns.

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Definitions:

Budgeted Overhead

An estimate of the indirect costs or overheads that a business expects to incur during a specific period.

Direct Labor Hour

The actual time spent by workers directly producing a product or providing a service.

Actual Overhead

The actual amount of indirect costs associated with production, including utilities, maintenance, and factory overhead, incurred during a specific period.

Labor Rate Variance

A measure of the difference between the actual cost of labor and the budgeted or standard cost.