Wages Are Often Tied to Expected Rates of Inflation; Thus,one

question 156

Multiple Choice

Wages are often tied to expected rates of inflation; thus,one reason why inflation is important is that

• A) when wages rise faster than inflation,companies lose money.
• B) when wages rise slower than inflation,workers suffer but corporate profits increase.
• C) inflation creates uncertainty about costs and prices,which affects both employees and employers.
• D) all inflation will eventually lead to hyperinflation,political instability,and war.
• E) menu costs mean restaurants have to print new menus,which is costly and unpleasant.

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Definitions:

Direct Labor Hours

The total amount of time workers spend directly manufacturing a product or providing a service.

Mix Variance

Captures the effect of substitution among the products, holding constant the number of units sold.

Direct Labor

The cost associated with employees who are directly involved in the production of goods or services.

Direct Labor Efficiency Variance

A measure used in cost accounting to evaluate the difference between the actual hours worked and the standard hours expected for the production achieved.