Using Economic Value Added (EVA) to Calculate Residual Income, the Cost

question 16

Multiple Choice

Using Economic Value Added (EVA) to calculate residual income, the cost of capital employed is

• A) the standard percentage cost of capital multiplied by the average capital employed.
• B) the actual percentage cost of capital multiplied by the average capital employed.
• C) the standard percentage cost of capital multiplied by the total capital employed.
• D) the actual percentage cost of capital multiplied by the total capital employed.

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Definitions:

Standard Hours

The established amount of time required to perform a task under normal conditions.

Variance Reports

Documents that show the difference between planned and actual financial performance.

Internal Reports

Reports generated within an organization, intended for internal strategic decision-making and performance evaluation.

Labor Price Variance

The difference between the actual cost of labor and the standard or budgeted cost of labor over a period.