Which of the Following Call Options Would Command the Higher

question 34

Multiple Choice

Which of the following call options would command the higher premium, other things equal?

• A)October 2015 expiration, $45 strike price
• B)December 2015 expiration, $40 strike price
• C)March 2016 expiration, $45 strike price
• D)June 2016 expiration, $40 strike price

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Definitions:

Total Period Cost

Refers to the sum of all costs associated with production and operations for a specific period.

Variable Costing

An accounting method that assigns only variable production costs to products - those costs that fluctuate with the level of production, such as raw materials and labor.

Unit Product Cost

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

Unit Product Cost

It represents the total cost to produce one unit of product, including direct materials, direct labor, and manufacturing overhead.