Benchmark Error

question 52

Multiple Choice

Benchmark error

• A) refers to the use of an incorrect market proxy in tests of the CAPM.
• B) can result in inconclusive tests of the CAPM.
• C) can result in incorrect evaluation measures for portfolio managers.
• D) refers to the use of an incorrect market proxy in tests of the CAPM and can result in inconclusive tests of the CAPM.
• E) All of the options are correct.

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Definitions:

Variable Costing

A bookkeeping procedure that adds only variable production fees (including direct materials, direct labor, and variable manufacturing overhead) into the costs associated with products.

Unit Product Cost

The total cost to produce a single unit of product, including direct materials, direct labor, and allocated overhead.

Direct Labor Cost

The expense of labor that can be directly attributed to the production of goods or services.

Net Operating Income

A company's revenue minus its operational direct and indirect costs, excluding taxes and interest.