If a Price Index Changed from 150 in 2008 to 148.5

question 104

Multiple Choice

If a price index changed from 150 in 2008 to 148.5 in 2009,while Jim Bob's nominal wage fell from $25 to $24,then Jim Bob is

• A)Better off like everyone else in the economy since prices are lower for consumers.
• B)Neither better nor worse off since his real wage remained constant.
• C)Better off since his nominal wage fell slower than the price level did.
• D)Worse off since his nominal wage fell faster than the price level diD.Jim Bob experienced a 4 percent decline in his nominal wage while prices fell on average by 1 percent,causing his real wage to be lower.

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Definitions:

Unit Product Cost

The total cost associated with producing one unit of a product, including direct materials, direct labor, and allocated overhead.

Segmented Income Statement

An income statement that separates costs and revenues into different segments, departments, or divisions of a business.

Contribution Approach

An income statement format that organizes costs by their behavior. Costs are separated into variable and fixed categories rather than being separated into product and period costs for external reporting purposes.

Manufacturing Overhead

All indirect costs related to manufacturing that cannot be directly traced to specific items produced, such as factory rent, utilities, and equipment depreciation.