A Product Sells for $750 in the United States

question 21

Multiple Choice

A product sells for $750 in the United States.The exchange rate is $1 to 1.65 Swiss francs.If purchasing power parity (PPP) holds, what is the price of the product in Switzerland?

• A) 123.75 Swiss francs
• B) 454.55 Swiss francs
• C) 750.00 Swiss francs
• D) 1,237.50 Swiss francs
• E) 1,650.00 Swiss francs

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Definitions:

Fixed Manufacturing Overhead

The portion of manufacturing overhead costs that remains constant irrespective of the level of production, such as salaries of supervisors and rent for the factory building.

Variable Costing

A costing method that includes only variable production costs (costs that vary with output) in the cost of goods sold and excludes fixed overhead costs.

Variable Costing

A costing method that includes only variable production costs (materials, labor, and variable manufacturing overhead) in product costs, excluding fixed overhead.

Net Operating Income

The company's profit remaining after operating costs are removed, but prior to the deduction of taxes and interest.