All of the Following Are Examples of the Law of Diminishing

question 7

Multiple Choice

All of the following are examples of the law of diminishing control that followed banking regulations put in place after the Great Depression except:

• A)Banks created new instruments to circumvent the law.
• B)Financial business migrated to unregulated institutions.
• C)Depositors demanded financial institutions be responsible for their financial decisions.
• D)Politicians were pressured to dismantle the regulations.

Understand the principle of calculating the cost of unused capacity and how it affects the costing system.

Develop an understanding of how job-order costing systems compute manufacturing overhead and apply it to jobs.

Gain insights into the preparation of income statements under a job-order costing system and the impact of cost of unused capacity.

Understand the concept of basing predetermined overhead rates on activity at capacity versus estimated activity for the year.

---

Definitions:

WACC

A firm’s capital expenses are determined through the Weighted Average Cost of Capital, which proportionally weighs each category of capital.

NPV

Net Present Value - a financial metric used to evaluate the profitability of an investment or project, taking into account the time value of money by discounting future cash flows.

Cash Flow

This refers to the movement of money into and out of a business, and is critical for assessing the liquidity and operational efficiency of the company.

Discount Rate

The rate of interest that is utilized in a DCF analysis for calculating the current value of anticipated cash flows.