If You Opt to Purchase Shares of Stock on Margin

question 41

Multiple Choice

If you opt to purchase shares of stock on margin rather than with cash, you will:

• A)decrease your maximum potential rate of return.
• B)increase your maximum potential rate of return.
• C)guarantee yourself a profit.
• D)eliminate any potential profit.
• E)have equal rates of return regardless of how the purchase is made.

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Definitions:

Labor Efficiency Variance

The difference between the actual labor hours used and the expected (standard) labor hours for the level of production, multiplied by the standard labor rate.

Direct Materials

The raw materials that can be directly attributed to the production of a product and are a part of the finished product.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected (standard) cost based on the actual level of activity.

Materials Price Variance

The difference between the actual cost of direct materials and the standard cost, multiplied by the actual quantity of materials purchased.