When People Spend More Money Without an Increase in the Supply

question 88

Multiple Choice

When people spend more money without an increase in the supply of goods, prices:

• A) must rise.
• B) must fall.
• C) may rise or fall.
• D) must stay the same.

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Definitions:

Direct Material Price Variance

The difference between the actual cost of direct materials used in production and the expected (or standard) cost of those materials.

Cost Standards

The benchmarks or norms established for the cost of materials, labor, and overhead that are used in measuring and controlling performance.

Actual Results

The outcomes or data obtained from real operations or experiments, not based on forecasts or estimates.

Direct Material Price Variance

The difference between the actual cost and the standard cost of raw materials used in the production process.