Futures Contracts Avoid the Difficulties of Forward Contracts By

question 53

Multiple Choice

Futures contracts avoid the difficulties of forward contracts by:

• A) efficiently linking buyers and sellers.
• B) controlling the price of the commodity being traded.
• C) allowing speculators to make a profit on futures contracts.
• D) covering any losses incurred by buyers and sellers on the contract.

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Definitions:

Variable Cost

Costs that vary directly with the level of production or service activity, such as raw materials and direct labor.

Machine-hour

A unit of measure representing the operation of a machine for one hour, often used in cost accounting to allocate expenses.

Cost Formula Equation

An equation used to predict the total cost of production, combining both fixed and variable costs.

High-low Method

A technique used in cost accounting to estimate fixed and variable costs based on the highest and lowest levels of activity.