Which of the Following Statements Is CORRECT

question 19

Multiple Choice

Which of the following statements is CORRECT?

• A) "Characteristic line" is another name for the Security Market Line.
• B) The characteristic line is the regression line that results from plotting the returns on a particular stock versus the returns on a stock from a different industry.
• C) The slope of the characteristic line is the stock's standard deviation.
• D) The distance of the plot points from the characteristic line is a measure of the stock's market risk.
• E) The distance of the plot points from the characteristic line is a measure of the stock's diversifiable risk.

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Definitions:

Fixed Manufacturing Overhead

Indirect production costs that remain constant regardless of the volume of production, such as factory rent and salaries of managers.

Direct Labour

The labor costs directly attributable to the production of goods or services, typically wages paid to workers who are directly involved in manufacturing.

Direct Materials

Raw materials that are directly traceable to the production of specific goods or services and are an integral part of the finished product.

Target Costing

A pricing strategy in which the selling price of a product is determined first, and then the manufacturing cost is managed to meet that selling price.