A Firm Can Hire Six Workers at a Wage Rate

question 168

Multiple Choice

A firm can hire six workers at a wage rate of $8 per hour but must pay $9 per hour to all of its employees to attract a seventh worker. The marginal wage cost of the seventh worker is

• A) $9.
• B) $10.
• C) $15.
• D) $21.

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Definitions:

Direct Labor-hours

Direct labor-hours are the total hours worked by employees directly involved in the manufacturing process, used as a measure for allocating labor costs to products.

Predetermined Overhead Rate

The rate estimated at the beginning of a period to allocate overhead to products or job orders, calculated based on expected overhead costs and an allocation base.

Machine-hours

A measure of production activity that quantifies the total hours that machinery is in operation during a given period.

Manufacturing Overhead

All indirect costs related to the manufacturing process, including materials, labor, and expenses not directly tied to the production of goods.