If the Minimum Efficient Scale in the Production of Rubber

question 131

Multiple Choice

If the minimum efficient scale in the production of rubber exceeds the quantity of rubber any individual tire producer buys, _____.​

• A)tire producers should pay a low price for the rubber input
• B)tire producers should increase the usage of rubber in production
• C)tire producers should not integrate backward into rubber production
• D)tire producers should be charged a price that is above the cost of producing rubber
• E)tire companies should switch their resources to fiberglass production

---

Definitions:

Materials Quantity Variance

The difference between the actual and the standard amount of materials used in production, valued at the standard cost.

Labor Rate Variance

The difference between the actual cost of labor and the budgeted or standard cost, often used in budgeting and cost management.

Variable Overhead Rate Variance

The difference between the actual variable overheads incurred and the expected variable overheads based on standard rates.

Labor Rate Variance

The difference between the actual labor rate paid and the standard rate expected, multiplied by the total hours worked.