Because There Are a Variety of Factors in Addition to Inflation

question 11

Multiple Choice

Because there are a variety of factors in addition to inflation that affect exchange rates, this will:

• A) reduce the probability that PPP shall hold.
• B) increase the probability that PPP shall hold.
• C) increase the probability the IFE will hold.
• D) B and C

---

Definitions:

Variable Overhead

Costs that fluctuate with changes in production volume, such as utilities or indirect materials, which are part of the overall overhead but vary with the level of output.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the standard variable overhead allocated to produced goods, based on the standard variable overhead rate.

Direct Materials Purchases Variance

The difference between the actual cost of direct material purchases and the expected (or standard) cost, adjusted for volume purchased.

Standard Costs

Predetermined costs for materials, labor, and overhead used in budgeting and assessing performance.