Exhibit 35-4 -Refer to Exhibit 35-4.Under a Fixed Exchange Rate System,at the Exchange

question 51

Multiple Choice

Exhibit 35-4

-Refer to Exhibit 35-4.Under a fixed exchange rate system,at the exchange rate of E₃,the peso is __________ and there is a __________.

• A) overvalued; surplus of dollars
• B) undervalued; shortage of pesos
• C) overvalued; shortage of dollars
• D) undervalued; surplus of pesos

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Definitions:

Variable Costing

This is an accounting technique that incorporates only the variable costs of production, including direct materials, direct labor, and variable manufacturing overhead, into the costs of products.

Break-even Sales

The amount of revenue needed to cover total fixed and variable costs, resulting in neither profit nor loss.

Variable Costing

An accounting method that includes only variable production costs (direct labor, direct materials, and variable overhead) in product costs, excluding fixed overhead costs.

Absorption Costing

A ledger keeping approach in accounting that wraps all costs connected to manufacturing—expenses for direct materials, wages for direct labor, and all types of manufacturing overhead, fixed and adjustable—into a product's total cost.