The Seller of a Copper Futures Contract Noticed That Her

question 16

Multiple Choice

The seller of a copper futures contract noticed that her account was marked with a $500 gain yesterday.If the standardized contract requires delivery of 25,000 pounds of copper, what happened that day to the price of copper?

• A)The price closed down $0.02 per pound.
• B)The price closed up $0.02 per pound.
• C)The price closed down $0.20 per pound.
• D)The price closed up $0.20 per pound.

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Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overheads - in the cost of a product.

Full Costs

The complete cost of producing an item or providing a service, including direct, indirect, fixed, and variable costs.

Profitable

Describes a business or activity that generates more revenue than it spends in costs, resulting in a financial gain.

Variable Costing

A costing method that includes only variable production costs—direct materials, direct labor, and variable manufacturing overhead—in product costs.