A Normal Rate of Return on Capital

question 21

Multiple Choice

A normal rate of return on capital

• A) is a return just sufficient to keep investors satisfied.
• B) sends a signal to investors to move their capital elsewhere.
• C) does not allow a business to keep its capital equipment in the long run.
• D) represents positive economic profit.

---

Definitions:

Work In Process Inventories

Goods that are in the production process but are not yet completed, representing a stage between raw materials and finished goods.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a specific product and considered a variable cost.

Direct Labour

The labor costs that are directly attributable to the production of goods or services.

Manufacturing Overhead

Manufacturing overhead encompasses all indirect costs associated with the production process, such as utilities, maintenance, and factory supervisor salaries, not including direct materials or labor.