Under the Simplifying Assumptions Made in the Text, a Current

question 79

Multiple Choice

Under the simplifying assumptions made in the text, a current account surplus

• A) arises when a country's exchange rate rises.
• B) arises when the purchase of foreign assets by a nation's citizens exceed the purchase of domestic assets by a nation's citizens.
• C) is necessary for a long run economic growth.
• D) arises when exports exceed imports.

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Definitions:

Variable Costing

A cost accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs and treats fixed manufacturing overhead as a period expense.

Net Operating Income

The profit a company makes after deducting operating expenses but before interest and taxes from its total revenue.

Direct Labor Cost

The expense associated with employees who physically convert raw materials into the company's products; considered a variable cost.

Absorption Costing

A method of inventory costing that includes all manufacturing costs, both variable and fixed, in the cost of a product.