Jessica Invested in Quantro Stock When the Firm Was Unlevered

question 13

Multiple Choice

Jessica invested in Quantro stock when the firm was unlevered.Since then,Quantro has changed its capital structure and now has a debt-equity ratio of 0.30.To unlever her position,Jessica needs to:

• A)borrow some money and purchase additional shares of Quantro stock.
• B)maintain her current equity position as the debt of the firm did not affect her personally.
• C)sell some shares of Quantro stock and hold the proceeds in cash.
• D)sell some shares of Quantro stock and loan out the sale proceeds.
• E)create a personal debt-equity ratio of 0.30.

Evaluate the effectiveness of ABC in identifying cost drivers and allocating costs accordingly.

Apply knowledge of ABC in determining the total overhead cost allocated to products.

Understand the significance of first and second stage allocations in ABC.

Understand the fundamentals of activity-based costing (ABC) and its application in allocating manufacturing overhead costs.

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Definitions:

Numeraire

A standard unit of account or measuring stick in economics used to compare the value of various goods or services.

Utility Function

A mathematical tool used in economics to represent a consumer's preference ranking of different bundles of goods.

Pareto Optimal

A state of allocation of resources from which it is impossible to reallocate to make any one individual better off without making at least one individual worse off.

Competitive Equilibrium

A state in markets where supply equals demand, and no participant has an incentive to change their behavior.