A Leased Factory Building Has a Fixed Monthly Rental Payment

question 123

Multiple Choice

A leased factory building has a fixed monthly rental payment, and a variable overhead cost of energy and indirect labour.Which of the following is TRUE, assuming that all activity levels are within the relevant range?

• A)Variable OVH costs will increase as production increases, but Fixed OVH costs will decrease.
• B)Variable OVH costs will decrease as production increases, but Fixed OVH costs will increase.
• C)Variable OVH costs will increase as production increases, and Fixed OVH costs will increase.
• D)Variable OVH costs will increase as production increases, but Fixed OVH costs will remain constant.
• E)Both will increase with production, but at different rates.

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Definitions:

Social Loafing

Describes the phenomenon where individuals exert less effort to achieve a goal when working in a group compared to when working alone.

Counteract

To act against something in order to reduce its force or neutralize its effect.

Group Cohesiveness

The extent to which members of a group are bonded together, resulting in a strong sense of identity, commitment, and loyalty toward the group.

Cohesiveness

The degree to which members of a group or team are united toward common goals and exhibit loyalty to the group.