A Factory That Makes a Part Has Significant Idle Capacity

question 21

Multiple Choice

A factory that makes a part has significant idle capacity. The factory's opportunity cost of making this part is equal to:

• A) the variable manufacturing cost per unit.
• B) the fixed manufacturing cost per unit.
• C) the semivariable cost per unit.
• D) the total manufacturing cost per unit.
• E) zero.

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Definitions:

Regression Analysis

A set of statistical processes for estimating the relationships among variables, often to predict a dependent variable from one or more independent variables.

Indicator Variable

A variable used in statistical analyses that adopts a value of 1 if a certain condition is true and 0 if false, often used to represent the presence or absence of a characteristic.

Dummy Variable

A variable used in regression analysis to represent subgroups of the sample in your study.

Nominal Independent Variable

A variable used in statistical analysis that represents categories without a natural order or ranking.