Final answer:
Manufacturing costs assigned to work in process vary based on production technology and associated costs of labor and machinery. Changes in wages can shift the cost-effectiveness of different production technologies, requiring careful cost assessment and management. Correct option is
Step-by-step explanation:
When assigning manufacturing costs to work in process, various production technologies influence the total cost. In the given examples, the firm assesses which production technology is the low-cost option under different wage and machinery cost scenarios. Example A demonstrates that with wages at $40 and machine costs at $80, production technology 1, with 10 workers and 2 machines, is the most cost-effective.
However, when wages increase to $55 in Example B, production technology 2 with 7 workers becomes the lower-cost option. Lastly, Example C shows that with a further increase in wages to $90, production technology 3 emerges as the least expensive production form. These examples highlight the importance of analyzing production functions and factor payments to make informed decisions on cost management in manufacturing.
The origin of these cost figures is from the production function that helps to determine resource allocation for producing goods. A typical production function might illustrate the relationship between the number of workers and the quantity of outputs they can produce, such as widgets, which directly affects the variable costs in the short run. This calculation is crucial for businesses to understand their merchandise balance and current account balance, ensuring cost-efficient production and maximization of profits.