Suppose That Inventories Are Falling

question 196

Multiple Choice

Suppose that inventories are falling. We can expect that, in the future,

• A) unemployment will likely increase.
• B) unemployment will likely decrease.
• C) unemployment could increase or decrease, as its direction cannot be predicted based on inventories.
• D) real GDP will likely decrease.

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Definitions:

Direct Labor Cost

The sum of all expenses associated with labor that is directly used in the creation of products or services.

Labor Efficiency Variance

A measure of the difference between the actual hours worked and the standard hours expected, to produce a certain level of output.

Labor Rate Variance

The difference between the actual labor costs and the budgeted or standard labor costs, often due to differences in wage rates or work hours.

Standard Cost System

An accounting system that assigns predetermined costs to products and services, which are then compared to actual costs for variance analysis.