A Draft Made Out in the United States Calls for Payment

question 49

Multiple Choice

A draft made out in the United States calls for payment in German marks. Which of the following statements is correct?

• A) The draft is nonnegotiable since it must be paid in German marks.
• B) The draft is nonnegotiable because the rate of exchange fluctuates and it will interfere with the requirement that the instrument be payable in a fixed sum of money.
• C) The draft is negotiable if it satisfies all the requirements of negotiability under Article 3 of the UCC.
• D) The instrument is negotiable only if the exchange rate is written on the draft.

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Definitions:

Variable Overhead Rate Variance

The difference between the actual variable overheads incurred and the expected variable overheads based on standard rates.

Labor Rate Variance

The difference between the actual labor rate paid and the standard rate expected, multiplied by the total hours worked.

Labor Efficiency Variance

The variance between the real hours spent producing a good or service and the anticipated standard hours, times the standard wage rate.

Variable Overhead Rate Variance

The difference between the actual variable overhead costs incurred and the standard variable overhead expected for the actual production achieved.