Calculate the Return on Equity Given the Following Information: Common

question 110

Multiple Choice

Calculate the return on equity given the following information: common shares outstanding = 250,000; earning per share = $2.00; total assets = $2,000,000; total equity = $800,000.

• A) 61.50%
• B) 62.50%
• C) 63.50%
• D) 64.50%
• E) 65.50%

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Definitions:

Predetermined Overhead Rate

This rate is calculated before the period begins and is used to apply manufacturing overhead costs to products based on a consistent formula.

Fixed Manufacturing Overhead

Costs in manufacturing that do not vary with the level of production, including factory rent, salaries of permanent staff, and equipment depreciation.

Machine-Hours

A measure of the amount of time machines are operated in the manufacturing process, used as a basis for allocating costs.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate manufacturing overhead costs to products based on a selected activity base such as labor hours or machine hours.