Use the Following to Answer Questions

question 232

Multiple Choice

Use the following to answer questions:
-(Table: Variable Costs for Lawns) Look at the table Variable Costs for Lawns. During the summer, Alex runs a lawn-mowing service, and lawn-mowing is a perfectly competitive industry. Assume that costs are constant in each interval; that is, the variable cost of mowing 1 through 10 lawns is $100. His only fixed cost is $1,000 for the mower. His variable costs include fuel, his time, and mower parts. If the price for mowing a lawn is $60, how many lawns will Alex mow?

• A) 0
• B) 20
• C) 50
• D) 40

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Definitions:

Processing Batches

The group of items or materials processed together through the same production steps in a batch production process.

Total Cost

The aggregate amount of all types of costs incurred in producing a good or service, including direct, indirect, fixed, and variable costs.

Overhead Cost

Expenses not directly tied to the production of goods or services, such as rent, utilities, and administrative salaries.

Activity-Based Costing

A costing method that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption.