Suppose It Takes Paul 3 Hours to Bake a Cake

question 78

Multiple Choice

Suppose it takes Paul 3 hours to bake a cake and 2 hours to move the lawn, and suppose it takes Tom 2 hours to bake a cake and 1 hour to mow the lawn. Which of the following statements is correct?

• A)Paul has the absolute advantage in baking cakes
• B)Paul has the comparative in mowing the lawn
• C)Paul has the comparative in baking cakes
• D)Paul has the absolute advantage in mowing the lawn.

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Definitions:

Standard Costs

The predetermined costs associated with manufacturing a product or providing a service, used for budgetary and performance evaluation purposes.

Direct Labor Time Variance

A measure of the difference between the expected time to complete a task and the actual time taken.

Direct Labor Costs

The wages and related expenses for employees who are directly involved in the production of goods or services.

Rate Variance

The difference between the standard cost and the actual cost based on the rate of an input.