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and uses it to model, or estimate, the cost of its product.
Cost = FC + (a × L) + (b × M)
Where: FC = fixed costs
L = labor rate per hour
M = material cost per pound
please explain your answer
Which one of the following changes would have the greatest impact on invalidating the results of this model?
A. A significant reduction in factory overheads, which are a component of fixed costs.
B. Renegotiation of the union contract calling for much higher wage rates.
C. A large drop in material costs, as a result of purchasing the material from a foreign source.
D. A significant change in labor productivity.
Choose the answer d: a significant change in labor productivity. Because the volume of production has to do with the great cost in terms of the greater volume of production unit said the percentage of the one of your cost Fixed
C. A large drop in material costs, as a result of purchasing the material from a foreign source.
D. A significant change in labor productivity.
because the fixed costs id fixed within the relevant range of output
if the productivity changed in a significant way the output level will change and the fixed cost will change.
also the change in productivity will cause the DL cost per unit to change
D. A significant change in labor productivity.
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