The Pass-Through Rate

question 42

Multiple Choice

The pass-through rate

• A) Is the increase in price that occurs in response to a small increase in marginal cost
• B) Is measured per dollar of increase in marginal cost
• C) Is the ratio
• D) All of these

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Definitions:

Unexpected Spoilage

Loss or waste of materials, products, or resources that occurs unexpectedly during the production process and is not a part of planned spoilage.

Normal Spoilage

Normal spoilage refers to the expected amount of waste or loss of materials during a production process, considered as a usual and unavoidable cost of doing business.

Unfavorable Variance

A situation where actual costs exceed budgeted or expected costs, often indicating poorer than expected financial performance.

Actual Costs

The real costs incurred for materials, labor, and overhead in producing goods or delivering services, as opposed to estimated costs.