Suppose That a "Doggie Day Care" Firm Uses Only Two

question 164

Multiple Choice

Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital) . In the short run, the firm most likely considers

• A)both labor and capital to be fixed.
• B)both labor and capital to be variable.
• C)labor to be variable and capital to be fixed.
• D)capital to be variable and labor to be fixed.

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Definitions:

Manufacturing Overhead

All indirect costs associated with the manufacturing process, excluding direct materials and direct labor.

Activity-Based Costing

An approach to costing that recognizes activities within an organization and distributes their costs across all products and services according to the real consumption of each.

Product Margin

The difference between the selling price of a product and its production costs, indicating the profitability of a product.

Activity-Based Costing

A method of allocating costs to products and services based on the activities that contribute to those costs instead of on traditional measures like machine hours.