If the Nominal Interest Rate Is 5 Percent and the Rate

question 54

Multiple Choice

If the nominal interest rate is 5 percent and the rate of inflation is -2.5 percent,then the real interest rate is

• A)-7.5 percent.
• B)-2.5 percent.
• C)2.5 percent.
• D)7.5 percent.

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Definitions:

Activity-Based Costing

A strategy for attributing overhead and indirect expenditures to associated services and products, determined by the activities demanded by each.

Estimated Overhead Cost

An approximation of the indirect costs associated with production, used for budgeting and pricing purposes.

Activity Cost Pools

Activity Cost Pools are aggregations of all the costs associated with particular activities used in activity-based costing to allocate overhead costs more accurately.

Predetermined Overhead Rates

Rates used to apply manufacturing overhead to products or job orders, calculated in advance based on estimated overhead costs and activity levels.