Suppose Prices Increase by 3% Per Year

question 195

Multiple Choice

Suppose prices increase by 3% per year. What nominal percentage return on your savings account would you require to get a 3% real return?

• A) 3%
• B) 9%
• C) 8%
• D) 6%

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Definitions:

Journalize

The process of recording transactions in the journal of a company, detailing the financial activities.

Manufacturing Overhead Variance

The difference between the actual manufacturing overhead costs incurred and the overhead costs allocated to the production process based on a predetermined rate.

Direct Labor Hours

The cumulative working hours of employees directly engaged in the production process.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual units of production, based on a specific activity (e.g., labor hours or machine hours).