Wadhams Snow Removal's Cost Formula for Its Vehicle Operating Cost

question 136

Multiple Choice

Wadhams Snow Removal's cost formula for its vehicle operating cost is $1,900 per month plus $430 per snow-day.For the month of December,the company planned for activity of 16 snow-days,but the actual level of activity was 21 snow-days.The actual vehicle operating cost for the month was $11,470.The vehicle operating cost in the planning budget for December would be closest to:

• A)$10,930
• B)$11,470
• C)$8,739
• D)$8,780

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Definitions:

Law of Diminishing

Refers to the Law of Diminishing Returns, which states that adding more of one factor of production, while holding others constant, will at some point yield lower per-unit returns.

Marginal Returns

The change in output resulting from a one-unit increase in a particular input, while holding other inputs constant.

Marginal Cost

The rise in overall expenses associated with the production of an extra unit of a product or service.

Average Total Cost

The total cost of production divided by the number of units produced, giving a per unit cost of production.