Two Alternatives, Code-Named X and Y, Are Under Consideration at Donat

question 81

Multiple Choice

Two alternatives, code-named X and Y, are under consideration at Donat Corporation. Costs associated with the alternatives are listed below.
-Are the materials costs and processing costs relevant in the choice between alternatives X and Y? (Ignore the equipment rental and occupancy costs in this question.)

• A) Both materials costs and processing costs are relevant
• B) Only materials costs are relevant
• C) Only processing costs are relevant
• D) Neither materials costs nor processing costs are relevant

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Definitions:

Incidence

The measure or rate at which a particular phenomenon occurs, often used in the context of disease or taxation.

Perfectly Elastic

Describes a situation in which the quantity demanded or supplied reacts to the smallest change in price with an infinite amount of change in quantity.

Excise Tax

A targeted tax levied on the sale of specific goods and services, such as alcohol and tobacco, often used to discourage consumption.

Equilibrium Output

The level of production in a market where the quantity supplied equals the quantity demanded, leading to a state of balance without excess supply or demand.