During the Middle of the Fiscal Year, AWR Corporation Unexpectedly

question 62

Multiple Choice

During the middle of the fiscal year, AWR Corporation unexpectedly revised its estimate of a plant asset's life from 5 years to 7 years. That revision is most likely to lead to:

• A) No variance, since the plant asset's cost is sunk
• B) Fixed overhead spending variance
• C) Fixed overhead production volume variance
• D) Variable overhead spending variance

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Definitions:

Put Contract

A financial contract giving the holder the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time.

Writer of a Call Option

The individual or entity that sells a call option and has the obligation to sell the underlying asset at the set strike price if the option is exercised.

Buyer of a Put Option

An investor who acquires the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price within a set time frame.

Underlying Asset

The financial asset upon which a derivative's price is based, including stocks, bonds, commodities, currencies, interest rates, and market indexes.