Su Lee Wrote Three Call Option Contracts with a Strike

question 5

Multiple Choice

Su Lee wrote three call option contracts with a strike price of $22.50 and an option price of $.55 per share. What is the net profit on this investment if the price of the underlying stock is $22.95 per share on the option expiration date? Ignore trading costs and taxes.

• A) $10
• B) $.30
• C) $.10
• D) $30
• E) $0

---

Definitions:

Variable Overhead

Expenses that vary with production volume, such as utility costs in a factory.

Standard Costs

Predetermined or estimated costs for a product or service, used for budgeting purposes and as a benchmark for measuring performance.

Materials Price Variance

A measure of the difference between the actual cost of materials and the expected cost, based on the standard price.

Direct Labor-hours

The total hours worked by employees directly involved in the manufacturing process, often used as a basis for allocating overhead costs in traditional costing systems.