If a Derivative Is Not Designated as a Hedge

question 1

Multiple Choice

If a derivative is not designated as a hedge:

• A) the change in market value must be recognized in net income when it changes.
• B) the change in market value is not recognized in net income.
• C) the change in fair value is not recognized in net income.
• D) the change in fair value must be recognized in net income when it changes.

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Definitions:

Labour Rate Variance

The difference between the actual cost of labor and the expected (or budgeted) cost.

Standard Hours Allowed

The amount of work hours allocated to complete a specific task or project, often used in performance measurement.

Denominator Level

In cost accounting, it refers to the level of activity used to allocate fixed costs to units of production.

Standard Costing

Standard costing is an accounting method that applies estimated costs to product costs for budgeting purposes and performance evaluation, facilitating variance analysis.