Assume an Economy Which Is Producing Only One Product

question 101

Multiple Choice

Assume an economy which is producing only one product.Output and price data for a three-year period are as follows. Refer to the above data.If year 2 is chosen as the base year, the price index for year one is:

• A)80
• B)100
• C)120
• D)20

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Definitions:

Direct Materials

Raw materials that are directly traceable to the production of a specific good or service and constitute a part of the finished product.

Fixed Factory Overhead

Comprises all the indirect costs associated with operating a factory that do not vary with production levels, such as rent, depreciation, and utilities.

Static Budget

A fixed budget established at the beginning of a period, not adjusted for changes in activity or actual performance levels.

Continuous Budget

A rolling financial plan that continuously updates by adding a new period as the current period is completed.