The Cost of Capital for Retained Earnings

question 98

Multiple Choice

The cost of capital for retained earnings:

• A) cannot be determined
• B) may be determined by more than method
• C) is greater than the cost of capital for common stock
• D) is higher than the cost issuing bonds

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Definitions:

Actual Materials

The actual amount of materials used in the production process, measured in physical units or cost.

Standard Price

A predetermined cost for a unit of material, labor, or overhead anticipated in the budgeting process, against which actual costs are compared.

Actual Output

The real quantity of goods or services produced by a company, as opposed to planned or expected output.

Standard Variable Overhead Rate

The rate used in budgeting and costing that applies variable overheads to a specific activity basis such as labor hours.