Three Different Divisions of a University Are Estimating Costs for Their

question 62

Multiple Choice

Three different divisions of a university are estimating costs for their human resources departments. Each division has a cost structure that is different from the other divisions and those structures are represented by the following cost behaviour patterns.
$\begin{array}{c}\begin{array}{c}\text {Number of}\\\underline{\text {Employees}}\\0 \\25\\ 50\\ 75\\ 100\end{array}\begin{array}{c}\\\underline{\text { Cost A }} \\ \$ 0 \\50 \\100 \\125 \\200\end{array}\begin{array}{c}\\\underline{\text { Cost B} } \\\$ 120 \\118 \\123 \\124 \\119\end{array}\begin{array}{c}\\\underline{\text { Cost C} } \\\$ 118 \\180 \\245 \\296\\360 \end{array}\end{array}$

Which cost is best described as mixed?

• A) Cost A
• B) Cost B
• C) Cost C
• D) Cost B and Cost C

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Definitions:

Relative Systematic Risk

The risk inherent to the entire market or market segment, which can be compared relative to other stocks or securities within the same market.

Beta

A measure of a stock's volatility in comparison to the overall market; a beta greater than 1 indicates higher than market volatility.

Expected Market Rate

The anticipated return on investment in the financial markets based on current conditions and historical data.

Overpriced

A term describing an asset whose market price is considered higher than its intrinsic value.