In a Proposal to Increase the Production of Clock Radios

question 24

Multiple Choice

In a proposal to increase the production of clock radios, the sales managers of Rinaldo Electronics reported the total additional cost required to meet the increased production level. The increase in total cost is known as the

• A) opportunity cost.
• B) out-of-pocket cost.
• C) controllable cost.
• D) incremental cost.

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Definitions:

Discount Rate

The interest rate charged by central banks on loans to commercial banks or the rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows.

Excess Reserves

The amounts of cash banks hold in their vaults or deposit at the central bank which exceed the regulatory requirements.

Money Supply

The entire financial capacity of an economy, taking into account cash, coins, and the amounts in both checking and savings accounts, at a specific point in time.

Required Reserve Ratio

The percentage of deposits that banks are legally required to keep on hand as reserves, not loaned out.