What Does It Mean to Say That the Inflation Rate

question 38

Multiple Choice

What does it mean to say that the inflation rate last year was 5%?

• A)All prices are 5% less at the end of the year than they were at the beginning of the year.
• B)The price of specific products increased 5% between the beginning and the end of the year.
• C)On average, a typical basket of goods costs 5% more at the end of the year than it did at the beginning of the year.
• D)The general purchasing power of the dollar has increased 5% between the beginning of the year and the end of the year.

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Definitions:

Activity-Based Costing

A costing method that allocates overhead and indirect costs to specific activities related to production, providing more accurate product costing.

Activity Rates

Charges used to assign costs to cost objects, based on activities that drive costs in activity-based costing.

Budgeted Cost

An estimate of the expenses for various operations, projects, or activities planned for a specific period.

Activity Cost Pools

A grouping of all costs associated with a particular activity, used in activity-based costing to allocate costs more accurately to products or services.