Ekholm Corporation Is a Shipping Container Refurbishment Company That Measures

question 91

Multiple Choice

Ekholm Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. When the company prepared its planning budget at the beginning of December, it assumed that 30 containers would have been refurbished. However, 35 containers were actually refurbished during December.
The activity variance for "Employee salaries and wages" for December would have been closest to:

• A) $5,000 U
• B) $5,000 F
• C) $4,000 U
• D) $4,000 F

---

Definitions:

Cost of Equity

The return that investors expect for investing in a company's equity, often calculated using models like the Capital Asset Pricing Model (CAPM).

Market Risk Premium

Slope of the Security Market Line; the difference between the expected return on a market portfolio and the risk-free rate.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements and can finance its operations.

Risk-Free Rate

The return on an investment with zero risk, typically associated with government bonds.