What Is the Difference Between a Budget Line and an Indifference

question 13

Multiple Choice

What is the difference between a budget line and an indifference curve?

• A) One is measured in dollars while the other in units of goods.
• B) One shows what is possible while the other shows what is preferred.
• C) One shows a positive relationship, and the other shows a negative relationship.
• D) The budget line is bowed in toward the origin, and the indifference curves are linear.
• E) There is no difference.

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Definitions:

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to individual jobs, calculated at the beginning of a period by dividing the estimated total overhead costs by an allocation base such as estimated total units in the allocation base.

Variable Manufacturing Overhead

The portion of manufacturing overhead costs that varies directly with production volume, such as utilities and raw materials.

Machine-Hours

A unit of measure indicating the duration machines are in operation in a manufacturing setting, critical in cost allocation and efficiency studies.

Predetermined Overhead Rate

A rate used to apply manufacturing overhead to products or job orders, calculated before the period begins based on estimated costs.