Which of the Following Will Occur When the Capital Stock

question 47

Multiple Choice

Which of the following will occur when the capital stock increases?

• A)profit per unit of capital will increase
• B)profit per unit of capital will decrease
• C)there will be no change in profit per unit of capital
• D)there will be an ambiguous effect on profit per unit of capital
• E) none of the above

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Definitions:

Gross Margin

A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage.

Variable Costing

An accounting method that includes only variable production costs (materials, labor, and overhead) in product costs and treats fixed manufacturing overhead as an expense of the period.

Period Cost

Expenses that are not directly tied to production activity and are expensed in the period in which they are incurred.

Variable Costing

A technique in accounting that encompasses only costs that vary with production (including direct materials, direct labor, and variable manufacturing overhead) in the pricing of products.