Explain Whether the Following Is a Fair Comment

question 49

Essay

Explain whether the following is a fair comment."The farmer does not avoid risk by selling grain futures.If grain prices stay above a certain rate, then the farmer will actually have lost money by selling grain at a specified price.

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Definitions:

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate estimated overhead costs to products or job orders based on a selected activity base.

Activity-Based Costing

A pricing strategy that attributes overhead and indirect expenses to associated goods and services by determining cost drivers.

Traditional Costing Method

An accounting approach that assigns manufacturing overhead costs to products based on volume-related measures such as direct labor hours or machine hours.

Activity-Based Costing

An accounting methodology that assigns costs to products or services based on the activities that go into producing them, aiming for more accurate allocation of overhead costs.