Which of the Following Statements Is False

question 7

Multiple Choice

Which of the following statements is false?

• A)From a theoretical standpoint, the capital weights used to calculate the WACC should be based on the market values of the different securities.However, if a firm's book value weights are closest to its market value weights, book value weights can be used as proxies.
• B)Generally, only long-term debt is included in the calculation of the WACC, because the WACC is used for capital budgeting purposes, which includes long-term assets, and those assets are financed with long-term capital.
• C)The first break point a firm encounters in capital budgeting is for retained earnings, unless a firm has zero or negative net income.
• D)The weighted average cost of capital will change whenever a break point occurs.
• E)Answers a and b are both false.

---

Definitions:

Direct Labor Time Variance

The difference between the actual labor time spent on a product and the standard labor time expected, affecting product costs.

Standard Costs

Predetermined or estimated costs that are used as benchmarks for measuring the performance of actual costs in manufacturing or production.

Actual Costs

Actual costs are the real or true costs incurred for materials, labor, and overhead in the production of goods or provision of services, as opposed to estimated or standard costs.

Direct Labor Rate Variance

The difference between the actual cost of direct labor and the expected (or standard) cost, used to analyze labor cost efficiencies or inefficiencies during production.