Neptune Pool Company Is Involved in a Number of Competitive

question 73

Multiple Choice

Neptune Pool Company is involved in a number of competitive bidding situations. The following costs are anticipated for a project to be bid for Trimex Manufacturing: $$\begin{array} { l r } \text { Direct materials used } & \$ 680,000 \\\text { Direct labor } & 2,450,000 \\\text { Allocated variable overhead } & 570,000 \\\text { Allocated fixed cost } & 230,000\end{array}$$ Which of these costs would be treated differently if Neptune had either excess capacity or no excess capacity?

• A) Direct materials used, $680,000.
• B) Direct labor, $2,450,000.
• C) Allocated variable overhead, $570,000.
• D) Allocated fixed cost, $230,000.
• E) None of these, as all four costs are considered in both situations.

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Definitions:

Inverse Demand Function

Represents the price of a good as a function of its quantity demanded, showing the maximum price consumers are willing to pay for a given quantity of the good.

Price Elasticity

The measure of how much the quantity demanded of a good responds to a change in the price of that good, showing the sensitivity of quantity demanded to price changes.

Grapes

Edible berries, typically growing in clusters on a vine, used in making wine, eaten fresh, or dried to produce raisins.

Demand Function

A mathematical function showing the quantity of a good demanded at different prices.