Exhibit 5-3
Hayley Inc -Refer to Exhibit 5-3

question 45

Multiple Choice

Exhibit 5-3
Hayley Inc.is using the account analysis approach to identify the cost behavior of production costs for one month.The production manager was asked to review these costs and provide her best guess as to how they should be categorized.Hayley produced 200 units for the month.She responded with the following information.
$\begin{array}{lrrr}&\text { Total } &=\text { Variable } &+\text { Fixed }\\ \text { Direct materials used in production } & \$ 370,000 & \$ 370,000 & \$-0- \\\text { Direct labor used in production } & 230,000 & 230,000 & -0- \\\text { Overhead costs } & \underline{220,000} & \underline{200,000} & \underline{20,000} \\\text { Total production costs } & \underline{\$ 20,000} & \underline{\$ 800,000} & \underline{\$ 20,000}\end{array}$

-Refer to Exhibit 5-3.Which of the following best describes the production costs in equation form?

• A)Y = $20,000 * $4,000X
• B)Y = $20,000 + $4,000X
• C)Y = $800,000 + $20,000X
• D)Y = $4,100X
• E)None of the answer choices is correct.

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Definitions:

Classical Economists

Economists of the 18th and 19th centuries who believed in free markets, minimal government intervention, and the self-regulating nature of economies.

Stable Economy

An economic condition characterized by predictability, low inflation, and minimal unemployment, indicating a healthy economic environment.

Say's Law

An economic theory proposing that supply creates its own demand, meaning production inherently creates the means to purchase other goods.

Keynesian Theory

Keynesian Theory is an economic theory stating that government intervention through fiscal and monetary policy is necessary to manage aggregate demand and address economic cycles.