What Is the Primary Difference Between Transaction Exposure and Accounting

question 8

Multiple Choice

What is the primary difference between transaction exposure and accounting exposure?

• A) Transaction exposure results from changes in currency exchange rates, whereas accounting exposure is the result of changes in accounting method.
• B) Transaction exposure results in changes in cash flow, whereas accounting exposure does not necessarily result in changes in cash flow.
• C) Transaction exposure must be hedged, but accounting exposure does not need to be hedged.
• D) Transaction exposure affects only monetary assets and liabilities, whereas accounting exposure affects all assets and liabilities.

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Definitions:

Materials Quantity Variance

The difference between the actual quantity of materials used in production and the standard quantity allowed for the actual output, multiplied by the standard price per unit of materials.

Actual Quantity

The real amount or number of units of materials, labor, or overhead used in the production process.

Standard Quantity

The predetermined amount of materials or resources expected to be used in the production of a product.

Variable Manufacturing Overhead

Indirect production costs that fluctuate with the level of output, including utilities and supplies that vary with production volume.