When an Option Is Exercised, It Is Always to the Advantage

question 71

True/False

When an option is exercised, it is always to the advantage of the long position and to the disadvantage of the short position.

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Definitions:

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels within a business.

Volume Variance

The difference between the expected volume of production or sales and the actual volume, affecting budget and performance analysis.

Fixed Overhead

Fixed overhead refers to the indirect costs of production that remain constant regardless of the level of output, such as rent, salaries, and insurance.

Machine Hour

A measure of the operating time of a machine, used in costing to allocate expenses based on machine use.