Figure 16-5 -Refer to Figure 16-5. Suppose the Firm Represented in the Represented

question 90

Multiple Choice

Figure 16-5
-Refer to Figure 16-5. Suppose the firm represented in the diagram decides to use a two-part pricing strategy such that such that it charges a fixed fee and a per-unit price equal to the competitive price. (This is also called an optimal two-part tariff.) What is the quantity it should produce?

• A) 240 units
• B) 320 units
• C) 480 units
• D) 560 units

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Definitions:

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product and constitute a significant portion of the product’s cost.

Direct Labour

The wages of workers or employees who are directly involved in the production of goods or the delivery of services.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead incurred and the expected (standard) variable overhead based on the efficient usage of manufacturing resources.

Direct Material Used

The raw materials that are directly included in the finished product, easily traceable to specific goods or batches of goods.