A Firm Practices a Chase Strategy

question 56

Multiple Choice

A firm practices a chase strategy.Production last quarter was 1000.Demand over the next four quarters is estimated to be 900,700,1000,and 1000.Hiring cost is $20 per unit,and layoff cost is $5 per unit.Over the next year,what will be the sum of hiring and layoff costs?

• A)$500
• B)$2,500
• C)$7,500
• D)$7,000
• E)$12,500

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Definitions:

Direct Materials

Materials that can be directly linked to the creation of a product and represent a large part of the cost of production.

Direct Labor

The labor cost of workers who are directly involved in the production of goods or the provision of services.

Factory Overhead

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

Direct Labor

The labor cost directly attributed to the production of goods or services, typically wages paid to those on the manufacturing floor.