Generally Speaking, When Both a Firm's Costs and Its Price

question 9

Multiple Choice

Generally speaking, when both a firm's costs and its price is sensitive to exchange rate changes

• A)the firm is not subject to high degrees of operating exposure.
• B)the firm is subject to high degrees of operating exposure.
• C)the firm should hedge.
• D)none of the above

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Definitions:

Absorption Costing

A method of accounting that encompasses all costs associated with manufacturing (such as direct materials, direct labor, as well as both variable and fixed overhead expenses) in the pricing of a product.

Variable Costing

An accounting method that includes only variable costs—costs that change with production levels—in the calculation of unit cost.

Standard Costs

Estimated costs associated with manufacturing a product or providing a service, used for budgeting and performance evaluation.

Absorption Costing

An approach to accounting that incorporates all costs associated with manufacturing, including direct materials, direct labor, and all overhead costs, both variable and fixed, into the price of a product.