Which One of the Following Statements Is Correct If a Speculator

question 55

Multiple Choice

Which one of the following statements is correct if a speculator short sells a commodity or financial futures contract?

• A) The speculator expects to profit from a decline in the price of the contract.
• B) The speculator stands to make an unlimited amount of profit since there is no limit to how high the price of the underlying commodity or financial instrument can rise.
• C) The speculator is hoping to gain some of the benefit derived from the volatile price while limiting his/her exposure to loss.
• D) The speculator may be hedging if the underlying commodity is not in the speculator's possession.

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Definitions:

Unit Product Cost

The total cost (direct materials, direct labor, and manufacturing overhead) divided by the number of units produced.

Machine-Hours

Machine-hours represent a measure of production time, indicating the total hours a machine is operated in the manufacturing process of goods.

Variable Manufacturing Overhead

Costs that vary with the level of production output and are related to manufacturing the product but not directly traceable to specific units of product.

Job J

Likely a specific reference to a job or project within a company, requiring a definition based on its context.