Following World War II, Inflation Became So Bad That Germans

question 27

Multiple Choice

Following World War II, inflation became so bad that Germans stopped using Reichsmarks for transactions, and instead used cigarettes for small transactions and cognac for large transactions. Which of the following best describes this situation?

• A)Reichsmarks were plentiful and valuable, but Germans preferred to barter.
• B)Germans wanted to disassociate themselves from the Third Reich.
• C)Cigarettes and cognac functioned as money in Germany in this period following World War II.
• D)Cigarettes and cognac were more plentiful than Reichsmarks, so Germans found them more convenient to use for transactions than Reichsmarks.

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Definitions:

Net Operating Income

A financial term representing the profit made from a company’s operations, after subtracting operating expenses from operating income.

Absorption Costing

The product cost determination method under this accounting strategy includes the expenses for direct materials, direct labor, and all manufacturing overhead, whether it is variable or fixed.

Gross Margin

A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage.

Variable Costing

An accounting method that includes only variable production costs (materials, labor, and overhead) in product costs and treats fixed manufacturing overhead as an expense of the period.