If There Is a Change in Input Prices, What Is

question 11

Multiple Choice

If there is a change in input prices, what is the most likely impact on production isoquants?

• A) They will shift leftward toward the origin.
• B) The curvature of the isoquant will change.
• C) They will remain unchanged.
• D) They will shift outward away from the origin.
• E) Uncertain, depends on which input prices change.

---

Definitions:

Excessive Inventories

A situation where a company holds more stock items than necessary, leading to increased storage costs and potential wastage.

Materials Price Variance

This measures the difference between the actual cost of materials used in production and the standard cost expected for those materials, indicating how efficiently an organization is purchasing materials.

Labor Rate Variance

The difference between the actual cost of direct labor and the expected (or standard) cost, calculated as (Actual rate - Standard rate) x Actual hours.

Standard Hourly Rate

The predetermined cost per hour for labor, used in budgeting and costing to assign labor costs to products and services.