Multiple Choice
In the context of cost-minimization, which type of cost changes in total as the level of output changes?
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10. The Costs of Production
Cost-Minimizing Combination of Labor and Capital
Multiple Choice
Which of the following is NOT a direct cost for a scooter manufacturer?
A
Raw materials used in scooter production
B
Wages paid to assembly line workers
C
Advertising expenses for promoting scooters
D
Electricity used to power the manufacturing equipment
Verified step by step guidance1
Step 1: Understand the definition of direct costs. Direct costs are expenses that can be directly traced to the production of a specific good or service. These costs vary with the level of output and are directly involved in the manufacturing process.
Step 2: Identify the costs related to the production of scooters. Raw materials used in scooter production are direct costs because they are essential inputs directly incorporated into the final product.
Step 3: Consider wages paid to assembly line workers. These wages are direct costs because the workers are directly involved in assembling the scooters, and their labor can be traced to the production process.
Step 4: Analyze electricity used to power manufacturing equipment. This is a direct cost if the electricity is specifically used for production machinery, as it is necessary for the manufacturing process and can be allocated to the product.
Step 5: Evaluate advertising expenses for promoting scooters. Advertising is a selling expense and is not directly tied to the production of scooters. It is considered an indirect cost or a period cost, as it supports sales rather than manufacturing.
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