The CPI Is Determined by Computing

question 47

Multiple Choice

The CPI is determined by computing:

• A) an average of prices of all goods and services.
• B) the price of a basket of goods and services that changes every year, relative to the same basket in a base year.
• C) the price of a fixed basket of goods and services, relative to the price of the same basket in a base year.
• D) nominal GDP relative to real GDP.

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Definitions:

Labor Efficiency Variance

The difference between the actual hours of labor worked and the expected (or standard) hours, multiplied by the standard hourly labor rate.

Direct Labor

The cost of wage-earning employees who are directly involved in the production of goods or services, such as assembly line workers.

Direct Labor Rate Variance

The difference between the actual cost of direct labor and the standard cost, demonstrating how actual labor costs differ from budgeted amounts.

Materials Price Variance

The difference between the actual cost of materials used in production and the standard cost, multiplied by the quantity of materials used.