Which of the Following Describes Tailing the Hedge

question 14

Multiple Choice

Which of the following describes tailing the hedge?

• A) A strategy where the hedge position is increased at the end of the life of the hedge
• B) A strategy where the hedge position is increased at the end of the life of the futures contract
• C) A more exact calculation of the hedge ratio when forward contracts are used for hedging
• D) None of the above

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Definitions:

Fixed Manufacturing Overhead

Costs that do not vary with the level of production or sales, including rent, depreciation, and salaries of certain employees in a manufacturing facility.

Standard Cost Variances

The differences between the actual costs incurred and the standard costs against which they are measured, often analyzed for materials, labor, and overhead.

Cost of Goods Sold

Represents the total direct costs attributable to the production of goods sold in a company, including materials and labor.

Materials Price Variance

The difference between the actual cost of materials purchased and the expected (standard) cost, indicating how effectively a company controls its materials costs.