If the Exchange Rate Changes from US$1 = €1

question 6

Multiple Choice

If the exchange rate changes from US$1 = €1.2 to US$1 = €1.4, then the U.S. dollar _____ and the euro _____.

• A) appreciates; depreciates
• B) depreciates; appreciates
• C) depreciates; depreciates
• D) appreciates; appreciates

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Definitions:

Fixed Production Costs

Payments that stay unchanged regardless of how much is produced or sold, covering rent, salaries, and insurance.

Net Income

The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenues.

Absorption Costing

A costing approach that encompasses all expenses related to production, including direct materials, direct labor, and all manufacturing overheads, both variable and fixed, as part of a product's cost.

Selling and Administrative Expenses

Expenses related to the selling of products and the management of the business, not directly tied to production.