A Soybean Oil Contract Calls for Delivery of 60,000 Pounds

question 116

Multiple Choice

A soybean oil contract calls for delivery of 60,000 pounds.What happens to the seller of a soybean futures contract at 16 cents per pound if the futures price closes the next day at 18 cents per pound?

• A)The contract is marked to market with a $1,200 loss.
• B)The contract is marked to market with a $1,200 gain.
• C)Futures contracts are voided if price increases before expiration.
• D)Nothing happens until the expiration of the contract.

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Definitions:

Net Operating Income

The profit generated from a company's regular, core business operations, excluding deductions of taxes and interest.

Unit Product Cost

The total cost (direct materials, direct labor, and overhead) divided by the number of units produced.

Variable Costing

A costing method that includes only variable manufacturing costs - direct materials, direct labor, and variable manufacturing overhead - in the cost of a product.

Unit Product Cost

The total cost assigned to a single unit of product, including direct materials, direct labor, and allocated overhead.