A Producer of Specialty Products Uses a Variety of Natural

question 2

Multiple Choice

A producer of specialty products uses a variety of natural and man-made materials to make unique countertops for kitchens and baths. One product line mixes concrete and natural river stone to make countertops that are polished to a high shine revealing unique patterns. Occasionally coarse sand will result in undesirable pitting and rough spots on surfaces. Consequently, as part of its quality control efforts, 8 by 4 metre polished slabs are checked periodically for imperfections. For each slab inspected the number of imperfections (pits, rough spots, etc.) is recorded. If the average number of imperfections per 8 by 4 metre polished slab is 2.6, the control limits for the appropriate control chart are

• A) 0 and 7.44.
• B) 0.98 and 4.21.
• C) 0 and 9.89.
• D) 1.24 and 3.96.
• E) 1.24 and 4.21.

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Definitions:

Variable Cost

A financial term describing expenses that vary directly with the production volume, such as materials and labor.

Fixed Costs

Expenses that do not vary with the level of production or sales, such as rent, salaries, and insurance premiums.

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 by each.

Break-Even Point

The point at which total revenues equal total costs, resulting in no profit but no loss.