Which of the Following Is Correct When Contracting Ahead in the Forward

question 11

Multiple Choice

Which of the following is correct when contracting ahead in the forward exchange market?

• A) At contract close you pay either the forward rate that was contracted or the then-current rate.
• B) Contracting ahead is always cheaper than waiting to pay spot rates.
• C) Your cost is locked in from the beginning of the contract, regardless of market changes.
• D) Paying the spot price is safer than contracting forward.

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Definitions:

Direct Materials

Raw materials that can be directly attributed to the production of specific goods or services and are considered a variable cost.

Factory Overhead

All indirect costs incurred during the manufacturing process, excluding direct materials and direct labor.

Factory Rent

Factory rent refers to the cost associated with leasing a premise for manufacturing operations, classified as an overhead expense in accounting.

Prime Costs

The sum of expenses for the raw materials and labor directly involved in the manufacturing of a product.