Given a Nominal Interest Rate of 6 Percent,in Which of the Following

question 69

Multiple Choice

Given a nominal interest rate of 6 percent,in which of the following cases would you earn the lowest after-tax real rate of interest?

• A)Inflation is 4 percent;the tax rate is 5 percent.
• B)Inflation is 3 percent;the tax rate is 20 percent.
• C)Inflation is 2 percent;the tax rate is 30 percent.
• D)The after-tax real interest rate is the same for all of the above.

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Definitions:

Direct Labor Hour

The amount of time spent by workers directly on the manufacturing of products or services.

Direct Labor

The expenses associated with the salaries of workers directly engaged in manufacturing products or providing services.

Job Order Costing

A cost accounting system in which costs are assigned to specific jobs or batches, typical in companies that produce unique products or jobs.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to products based on a relevant driver.