An Oat Futures Contract Is for 5,000 Bushels and the Price

question 66

Multiple Choice

An oat futures contract is for 5,000 bushels and the price can change by as much as 20 cents in either direction per trading day. If the margin requirement is $800 per contract, the maximum gain or loss in one day is

• A) plus or minus 25%.
• B) plus or minus 125%.
• C) plus or minus 1.25%.
• D) plus or minus 80%.

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Definitions:

Predetermined Overhead Rate

A rate calculated before a period begins by dividing estimated manufacturing overhead costs by an allocated base, used to apply overhead costs to products.

Fixed Overhead

Costs that remain constant regardless of the amount of goods produced or sold, including items like rent, salaries, and insurance.

Work in Process

Items or materials that are partially completed in the manufacturing process, situated between raw materials and finished goods.

Finished Goods

Goods that are available for sale after completing the production process.