Which of the Following Statements Is True of Earnings Per

question 15

Multiple Choice

Which of the following statements is true of earnings per share?

• A) A company is liable to pay tax on the earnings per share of stockholders.
• B) Earnings per share can be maximized by changing from corporation to sole proprietorship form of organization.
• C) A company can maximize its value by maximizing earnings per share.
• D) Earnings per share is used in measuring the firm's potential for generating future cash flows.
• E) A high earnings per share in the current period results in lower future risk position of the business.

Perform comprehensive analysis to prepare financial statements including income statement and balance sheet related to manufacturing accounts.

Compute sales revenue and expenses impacting net income.

Analyze changes in inventory accounts and their effects on cost of goods sold and manufactured.

Grasp the relationship between direct materials, work in process, and finished goods inventories in the accounting cycle.

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Definitions:

Variable Overhead

Overhead costs that fluctuate with changes in production level or business activity, such as utilities for machinery.

Efficiency Variance

The difference between the standard cost of labor or materials for actual production and the actual cost incurred, reflecting how efficiently resources are utilized.

Direct Labor-Hours

The total hours worked directly on the production of goods or delivery of services.

Variable Overhead

Costs that vary with production volume, such as supplies and utilities for manufacturing.