The Steps Involved in Calculating the Consumer Price Index and the Inflation

question 19

Multiple Choice

The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:

• A)Choose a base year, update the basket, find the prices, estimate the basket's cost, compute the index, and compute the inflation rate.
• B)Choose a base year, fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and compute the index.
• C)Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate.
• D)Fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and choose a base year and compute the index.

---

Definitions:

Support Department Cost Allocations

The process of distributing indirect costs from support departments to the producing departments based on their usage of services.

Product Costing System

A method used to assess the cost associated with producing a product, taking into account materials, labor, and overhead costs.

Production Department Rate

The Production Department Rate is a measure of efficiency in a production department, defined as the cost to produce one unit of product.

Overhead Application

The process of assigning manufacturing overhead costs to specific products or job orders based on a predetermined rate or method.