When the Level of Production Is Relatively Low, the Average

question 199

Multiple Choice

When the level of production is relatively low, the average cost per unit of output would ________ if output increased.

• A) increase
• B) decrease
• C) either increase or decrease depending on marginal cost
• D) remain constant

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Definitions:

Direct Labor

The labor cost directly tied to the production of goods or services, including wages and salaries of workers who are directly involved in manufacturing a product or delivering a service.

Standard Cost System

A cost accounting system that applies estimated costs to product costs for setting standards, controlling operations, and identifying variances or differences between actual costs and standard costs.

Direct Labor Costs

The total expense a company incurs for paying employees who are directly involved in the manufacturing of a product or the delivery of a service.

Standard Cost System

A cost accounting system that uses cost estimates for materials, labor, and overhead to assess performance by comparing these standard costs to actual costs incurred.