Which of the Following Statements About Futures Contracts Is Correct

question 61

Multiple Choice

Which of the following statements about futures contracts is correct?

• A) Most futures contracts are held to maturity.
• B) Future contract holders will either buy or sell an opposite contract on or before expiry date to close-out the contract.
• C) The majority of commodity futures are held to maturity.
• D) Financial futures contracts are delivered at maturity whereas all commodity futures are closed-out.

Understand and calculate the degree of operating leverage for given sales data.

Calculate and interpret the contribution margin and the contribution margin ratio.

Analyze the relationship between fixed, variable, and total costs in determining profitability.

Understand the impact of sales mix on profitability and break-even analysis.

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Definitions:

Fixed Manufacturing Overhead

Costs that do not vary with the level of production output, including expenses such as factory rent, salaries of manufacturing personnel, and property taxes on manufacturing facilities.

Direct Labor Variances

The differences between the actual costs of labor and the standard or expected costs, used to assess how effectively labor resources are used.

Direct Labor

Direct labor costs are the wages paid to workers directly involved in the production of goods or services. These costs are directly traceable to the cost object, such as a product unit.

Materials Price Variance

The difference between the actual cost of materials used in production and the expected (or standard) cost, which can indicate changes in materials prices or sourcing efficiency.