A Company Puts Four Products Through a Common Production Process

question 148

Essay

A company puts four products through a common production process.This process costs $100,000 each year.The four products can be sold when they emerge from this process at the "split-off point," or processed further and then sold.Data about the four products for the coming period are:
Determine which products should be sold at the split-off point and which should be processed further.

Understand the behavior of fixed and variable costs in relation to production levels.

Distinguish between committed and discretionary fixed costs.

Identify the characteristics and examples of variable costs.

Understand the concept of the relevant range and its application to costs.

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Definitions:

Extinction

In psychology, the gradual weakening and disappearance of a conditioned response when the conditioned stimulus is no longer paired with the unconditioned stimulus.

CS (Conditioned Stimulus)

An initially neutral stimulus that, after being associated with an unconditioned stimulus, eventually comes to trigger a conditioned response.

UCS (Unconditioned Stimulus)

An unconditioned stimulus is something that naturally and automatically triggers a response without any learning needed (e.g., food causing salivation in dogs).

Classical Conditioning

A conditioning process where two stimuli are systematically paired; the response, at first provoked by the second stimulus, is gradually elicited by the first stimulus alone.