Use the Information for the Question(s) Below

question 59

Multiple Choice

Use the information for the question(s) below.
Consider an economy with two types of firms, S and U. S firms always move together, but U firms move independently of
each other. For both types of firms there is a 70% probability that the firm will have a 20% return and a 30% probability that
the firm will have a -30% return.
-The standard deviation for the return on an individual firm is closest to?

• A) 23.0%
• B) 15.0%
• C) 10.0%
• D) 5.25%

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Definitions:

Standard Cost System

An accounting system that uses predetermined costs for product costing and variance analysis.

Variable Manufacturing Overhead

Costs in manufacturing that vary with production volume, such as supplies and utilities directly involved in the production process.

Machine-Hours

A unit of measure that represents the operation of one machine for one hour, used in manufacturing to allocate costs based on machine usage.

Standard Costing System

An accounting system that uses standard costs for determining the cost of products or services, facilitating variance analysis against actual costs.