Firms Whose Currency Is Prime for Devaluation May Choose to Purchase

question 60

Multiple Choice

Firms whose currency is prime for devaluation may choose to purchase extra inventory from foreign sources before the devaluation occurs.Which of the following is NOT a potential problem associated with such a practice?

• A)As a result of holding extra inventory, the firm now has extra sales.
• B)As a result of devaluation, the local government may freeze the price at which the firm can sell its inventory.
• C)The devaluation doesn't occur and the firm now experiences additional storage costs.
• D)All of the above are potential problems.

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Definitions:

Service

The act of providing assistance or benefits to customers or clients without the sale of tangible goods.

Price Variances

A measurement of the difference between the actual cost of a good or service and its expected cost.

Quantity Variances

Quantity variances are differences between the expected and actual quantities of inputs (materials, labor) used in the production process or during a specific period.

Direct Labor

The wages or salaries paid to employees who are directly involved in the production process of goods or services.