Kong Inc Reported Net Income of $298,000 During 2015 and Paid

question 136

Multiple Choice

Kong Inc. reported net income of $298,000 during 2015 and paid dividends of $26,000 on common stock. It also has 10,000 shares of 6%, $100 par value cumulative preferred stock outstanding. Common stockholders' equity was $1,200,000 on January 1, 2015, and $1,600,000 on December 31, 2015. The company's return on common stockholders' equity for 2015 is:

• A)17.4%
• B)17.0%
• C)15.1%
• D)21.3%

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Definitions:

Fixed Manufacturing Overhead

The portion of manufacturing overhead costs that remains constant regardless of the level of production or sales volume.

Manufacturing Overhead Budget

An estimation of all manufacturing costs, excluding direct materials and direct labor, planned for a specific period.

Direct Labor-Hours

The cumulative hours that employees engaged in the manufacturing process have completed.

Variable Overhead Rate

The portion of overhead costs that varies directly with production volume, calculated as variable overhead costs divided by a certain measure of activity (e.g., labor hours or machine hours).