Consider a Small Economy in Which Consumers Buy Only Two

question 74

Multiple Choice

Consider a small economy in which consumers buy only two goods: apples and pears.In order to compute the consumer price index for this economy for two or more consecutive years,we assume that

• A)the number of apples bought by the typical consumer is equal to the number of pears bought by the typical consumer in each year.
• B)neither the number of apples nor the number of pears bought by the typical consumer changes from year to year.
• C)the percentage change in the price of apples is equal to the percentage change in the price of pears from year to year.
• D)neither the price of apples nor the price of pears changes from year to year.

---

Definitions:

Labor Efficiency Variance

A discrepancy between the actual working hours and the expected standard hours, multiplied by the predetermined salary rate.

Direct Labor Standards

Direct labor standards are predetermined measures for the amount of labor time and cost that should be associated with producing a unit of product or performing a service.

Standard Cost Variances

The differences between the actual costs and the standard costs for manufacturing or service processes, used to control and manage expenses.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including material and labor costs.