You Purchase a Call Option on Pounds for a Premium

question 109

Multiple Choice

You purchase a call option on pounds for a premium of $.03 per unit, with an exercise price of $1.64; the option will not be exercised until the expiration date, if at all. If the spot rate on the expiration date is $1.65, your net profit per unit is:

• A) -$.03.
• B) -$.02.
• C) -$.01.
• D) $.02.
• E) none of the above

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Definitions:

Materials Quantity Variance

The difference between the actual quantity of materials used in production and the expected amount, which can impact the cost of goods sold.

Material J

Material J refers to a specific category or type of raw material or input identified with the letter "J" used in manufacturing or production processes.

Direct Materials Quantity Variance

The difference between the budgeted amount of materials needed for production and the actual amount used, valuated at the standard cost.

Labor Rate Variance

The difference between the actual labor costs incurred and the expected or standard labor costs for the production volume achieved.