Derivative Instruments Acquired to Hedge Exposure to Changes in the Fair

question 35

Multiple Choice

Derivative instruments acquired to hedge exposure to changes in the fair values of assets or liabilities are fair value hedges.Fair value hedges are

• A)hedges of a recognized asset or liability (or an identified portion of a recognized asset or liability), only.
• B)hedges of an unrecognized firm commitment (or an identified portion of that commitment), only.
• C)hedges on some or all of the cash flows of a recognized asset or liability, only.
• D)hedges on some or all of the cash flows of forecasted transactions, only.
• E)hedges of a recognized asset or liability (or an identified portion of a recognized asset or liability), and hedges of an unrecognized firm commitment (or an identified portion of that commitment).

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Definitions:

Variable Overhead Efficiency Variance

The difference between actual hours worked to produce an item and the standard hours expected, multiplied by the variable overhead rate.

FOH Volume Variance

The difference between the budgeted fixed overhead and the applied fixed overhead, which is attributed to the difference in actual and budgeted activity levels.

FOH Budget Variance

The difference between the actual and budgeted factory overhead costs over a certain period, indicating under or overspending.

Work in Process

Inventory that includes materials that have begun the production process but are not yet completed products.