If the Tariff Rate in Inputs Is the Same as the Tariff

question 23

Multiple Choice

If the tariff rate in inputs is the same as the tariff rate of finished goods the effective rate of protection will be

• A) the same as the nominal rate of protection
• B) zero
• C) larger than the nominal rate of protection
• D) maximized

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Definitions:

Variable Manufacturing Overhead

Costs in the manufacturing process that vary with the level of production output, such as materials and energy usage.

Fixed Manufacturing Overhead

Costs associated with manufacturing that remain constant regardless of the level of production, such as salaries of management and rent of the facility.

Absorption Costing

A costing method that includes all manufacturing costs, both fixed and variable, in the cost of goods sold.

Predetermined Overhead Rate

A rate calculated before the accounting period begins, used to allocate manufacturing overhead costs to individual products based on a certain activity base.