Assume the MPC Is

question 108

Multiple Choice

Assume the MPC is .8.If government were to impose $50 billion of new taxes on household income,consumption spending would initially decrease by:

• A) $100 billion.
• B) $90 billion.
• C) $40 billion.
• D) $50 billion.

Evaluate the impact of overhead allocation on product pricing and profitability.

Differentiate between plantwide overhead rates and activity-based costing rates.

Analyze the distribution of resource consumption across activity cost pools using ABC data.

Understand the role of direct labor-hours in the calculation of plantwide overhead rates versus ABC system rates.

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Definitions:

Direct Labor

The cost of labor that is directly involved in the production of goods, easily traceable to a product.

Direct Materials

The raw materials that can be directly attributed to the production of specific goods or services.

Incremental Revenues

The additional income generated from a new product or service or as a result of making changes to an existing operation.

Fixed Overhead

Regular, predictable costs that do not vary with the level of production or sales, such as rent, salaries, and insurance.