Great Lakes Farm Agreed This Morning to Sell General Mills

question 68

Multiple Choice

Great Lakes Farm agreed this morning to sell General Mills 25,000 bushels of wheat six months from now at a price per bushel of $9.75.This is an example of a:

• A) call option.
• B) put option.
• C) futures contract.
• D) money market security.
• E) fixed-income security.

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Definitions:

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products, calculated by dividing estimated overhead costs by an allocation base, such as direct labor hours.

Estimated Annual Overhead Costs

An approximation of the indirect costs that a business expects to incur over a year in its operations.

Expected Annual Operating Activity

The projected level of operations, including production and sales, anticipated for a company over a year.

Common Activity Base

A measure used in activity-based costing for allocating overhead and indirect costs to products or services based on relevant activities.