What Occurs During a Negative Demand Shock

question 160

Multiple Choice

What occurs during a negative demand shock?

• A) Output and price level increase.
• B) Output and price level decrease.
• C) Output increases;price level decreases.
• D) Output decreases;price level increases.

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Definitions:

Absorption Costing

A costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in the cost of goods sold.

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs, excluding fixed overhead.

Units Manufactured

The total quantity of products completed and ready for sale or use at the end of an accounting period.

Variable Costing

A costing method where only variable production costs are assigned to inventory and fixed overhead expenses are treated as period costs.