Explain Why the Long-Run Average Cost Is Typically U Shaped

question 130

Essay

Explain why the long-run average cost is typically U shaped.

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Definitions:

Variable Overhead Efficiency Variance

The difference between the actual hours taken to produce something and the standard hours expected, multiplied by the variable overhead rate.

Materials Price Variance

The difference between the actual cost of materials and the expected cost multiplied by the quantity of materials used.

Unfavorable

A term used to describe a variance or difference that negatively impacts financial performance.

Labor Rate Variance

The difference between the expected cost of labor at standard rates and the actual cost of labor incurred.