A US Timber Products Firm Has a Long-Term Contract to Import

question 21

Multiple Choice

A U.S. timber products firm has a long-term contract to import unprocessed logs from Canada. To avoid occasional and unpredictable changes in the exchange rate between the U.S. dollar and the Canadian dollar, the firms agree to split between the two firms the impact of any exchange rate movement. This type of agreement is referred to as:

• A) risk-sharing.
• B) currency-switching.
• C) matching.
• D) a natural hedge.

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Definitions:

Minimum Required Rate

Often refers to the minimum rate of return that an investment must offer to be considered viable or the minimum acceptable compensation for delay or risk.

Revenue Variance

The difference between how much the revenue should have been, given the actual level of activity, and the actual revenue for the period. A favorable (unfavorable) revenue variance occurs because the revenue is higher (lower) than expected, given the actual level of activity for the period.

Activity Measure

An allocation base in an activity-based costing system; ideally, a measure of whatever causes the costs in an activity cost pool.

Average Actual Selling Price

The mean price at which goods or services have been sold, calculated over a specific period or volume of sales.