Which of the Following Is True About the Comparison Between

question 5

Multiple Choice

Which of the following is true about the comparison between the CPI and the PPI?

• A) Both indices are based on the same basket of goods and services.
• B) Sales and excise taxes are included in the PPI, but they are not included in the CPI.
• C) The PPI is more commonly used to adjust wages for changes in the cost of living than the CPI.
• D) Unlike the CPI that uses prices people pay, the PPI uses the prices measured at the wholesale level.

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Definitions:

Routine Pricing

A method where prices are set based on standard costs plus a fixed profit margin, commonly used in consistent market conditions.

Variable Costs

Costs that vary directly with the level of production or sales volume.

Period Cost

Costs that are expensed in the period in which they are incurred, not directly tied to production activities.

Fixed Selling Cost

Expenses that do not change with the level of goods or services sold, such as salaries of sales personnel and rent of the sales space.