Which Statement Is Correct for a Simple Index Number

question 58

Multiple Choice

Which statement is correct for a simple index number?

• A)For the base year, the index is set to 0.000.
• B)We cannot use index numbers to compare two time series measured in different units.
• C)The simple relative index for period t = 5 is calculated as Y₅/Y₁.
• D)Weighted index numbers have few practical applications because of their complexity.

---

Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed overhead) in the cost of a product.

Variable Costs

Additional costs incurred when unit production increases. Variable costs per unit usually are assumed not to vary with volume.

Inventory Costing Method

A system used to value inventory, often involving methods such as First-In, First-Out (FIFO) or Last-In, First-Out (LIFO).

Step-fixed Costs

Costs that remain constant for a certain level of activity, but can change when a new activity level is reached.