In Order to Divide a Given Production Quota Between Two

question 53

Multiple Choice

In order to divide a given production quota between two production processes in such a way as to produce the quota at the lowest possible cost, one should produce the output where

• A)Average costs are equal for both processes
• B)Average cost is equal to marginal cost for both processes
• C)Marginal costs are equal in both processes
• D)Marginal costs are at least equal to ATC in each process

---

Definitions:

Fixed Factory Overhead Rate

A predetermined rate used to allocate fixed overhead costs to produced goods based on a consistent basis, such as labor hours or machine hours.

Fixed Factory Overhead Volume Variance

A measure used in cost accounting to determine the difference between the budgeted and actual volume of production, affecting the allocation of fixed overhead costs.

Standard Direct Materials

The predetermined cost and quantity of raw materials expected to be used in the production process, used for budgeting and performance evaluation.

Fixed Factory Overhead Volume Variance

The difference between the budgeted and actual fixed overhead costs, due to variations in production levels.