The Trading Principle Formulated by Adam Smith Maintained That

question 73

Multiple Choice

The trading principle formulated by Adam Smith maintained that

• A) international prices are determined from the demand side of the market.
• B) differences in resource endowments determine comparative advantage.
• C) differences in income levels govern world trade patterns.
• D) absolute cost differences determine the immediate basis for trade.

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Definitions:

Activity-Based Costing

A method of accounting that identifies the activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption.

Manufacturing Overhead

Costs associated with the production process that are not directly tied to the product, including factory rent, utilities, and equipment depreciation.

Direct Labor-Hours

A measure of the total hours worked directly on the production of goods or services by employees.

Predetermined Overhead Rate

The predetermined overhead rate is a rate that is calculated before a period begins, used to allocate estimated overhead costs to cost objects based on a chosen activity base.