Changes in Relative Prices May Occur

question 113

Multiple Choice

Changes in relative prices may occur

• A)Only in periods of stable prices.
• B)Only in periods of inflation or deflation.
• C)In periods of stable prices or in periods of inflation or deflation.
• D)In none of the other choices.

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Definitions:

Predetermined Overhead Rate

A rate used to charge manufacturing overhead cost to jobs that is established in advance for each period. It is computed by dividing the estimated total manufacturing overhead cost for the period by the estimated total amount of the allocation base for the period.

Special Order

A one-time order or contract that is outside of a company’s normal production or service offerings, often requiring special terms.

Variable Cost

Costs that vary directly with the level of production or volume of output.

Fixed Manufacturing Overhead

Costs associated with manufacturing that do not vary with the level of production, such as rent, salaries of permanent staff, and depreciation of factory equipment.