A Price Ceiling That Is Set Below the Equilibrium Price

question 64

Multiple Choice

A price ceiling that is set below the equilibrium price

• A)causes suppliers to lose money.
• B)creates a shortage.
• C)is non-binding.
• D)creates a surplus.

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Definitions:

Predetermined Overhead Rate

A predetermined overhead rate is an estimated charge per unit of activity used to allocate manufacturing overhead costs to products or job orders, based on anticipated costs and activity levels.

Direct Material

Raw materials that can be directly attributable to the production of finished goods in a manufacturing process.

Job J904

A specific project or job, designated by the identifier J904, within a company's job costing system.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual units of production, based on a specific activity base.