Assume That Large-Company Stocks Had an Average Rate of Return

question 95

Multiple Choice

Assume that large-company stocks had an average rate of return of 18.5 percent over the past 55 years while T-bills returned an average of 2.4 percent and inflation averaged 1.8 percent.Given this, the real return on large-company stocks was:

• A)13.56 percent
• B)12.49 percent
• C)16.40 percent
• D)14.83 percent
• E)15.99 percent

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Definitions:

Factory Overhead

All indirect costs associated with manufacturing, such as utilities, maintenance, and salaries of non-direct labor, which are not directly attributed to the production of goods.

Variable Factory Overhead

Costs in the manufacturing process that fluctuate with production volume, such as materials and labor directly involved in production.

Controllable Variance

The difference between actual costs and budgeted costs that a manager has direct control over in a given period.

Favorable Volume Variances

Differences between the expected volume of production or sales and the actual volume that lead to lower costs or higher profits than planned.