The Chained Consumer Price Index (CPI)is a Better Measure of Prices

question 95

Multiple Choice

The chained consumer price index (CPI) is a better measure of prices than the traditional CPI because

• A) it contains producer prices,not just consumer prices.
• B) it adjusts for price changes less frequently but across more goods.
• C) it adjusts for price changes more often,especially when new goods are introduced,which is important because new products' prices tend to fall soon after introduction.
• D) the chained index is called "chained" because it includes industrial goods that are not included in the traditional CPI.
• E) while omitting producer prices,it includes substitution between goods as relative prices change.

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Definitions:

Predetermined Overhead Rate

An estimated overhead rate used to allocate manufacturing overhead costs to products, calculated prior to the accounting period.

Direct Labour Hours

The cumulative hours employees spend that are directly linked to the manufacturing of goods or the provision of services.

T Accounts

T accounts are a visual aid in accounting to represent general ledger accounts, showing debits on the left side and credits on the right, to track financial transactions.

Direct Labour Cost

The total expense incurred by a company for the wages of the workforce directly involved in manufacturing or producing goods.