When an Employer Is Forced to Increase Wages at the Same

question 107

Multiple Choice

When an employer is forced to increase wages at the same rate of inflation:

• A) the worker is receiving a cost-of-living adjustment.
• B) the economy is experiencing stagflation.
• C) the economy is experiencing hyperinflation.
• D) the economy is experiencing disinflation.
• E) the effects of expansionary monetary policy are amplified.

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Definitions:

Labor Rate Variance

The difference between the actual cost of labor and the budgeted cost of labor at the standard rate.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected variable overhead based on standard cost accounting.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected variable overhead based on the predetermined rate.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a specific product and included in the direct costs of production.