Question

Figure shown relates to the manufacture of roof bolts. With respect to the cost/revenue vs production level, match the appropriate trend line with corresponding description. 

• A. (P)-(1); (R)-(3); (S)-(2)
• B. (P)-(2); (R)-(1); (S)-(3)
• C. (P)-(1); (R)-(2); (S)-(3)
• D. (P)-(3); (R)-(1); (S)-(2)

Hint:

In cost/revenue analysis, revenue typically increases linearly with production, while total cost increases more steeply, and indirect costs increase slowly.

Answer 1

The Correct Option is D

In the given figure, three trend lines are shown representing cost and revenue versus production level. Let's match the trend lines with their corresponding items: - Line A (P): Typically represents Revenue, which increases with the production level.
- Line B (R): Represents the Total cost, which increases with the production level due to direct and indirect operating costs.
- Line C (S): Represents the Indirect operating cost, which typically increases with the production level but at a slower rate than the total cost.
Thus, the correct matching is:
- (P)-(3) for Revenue,
- (R)-(1) for Total cost,
- (S)-(2) for Indirect operating cost.
Therefore, the correct answer is (D).