According to Tobin's Q Theory, When Equity Prices Are Low

question 14

Multiple Choice

According to Tobin's q theory, when equity prices are low the market price of existing capital is ________ relative to new capital, so expenditure on fixed investment is ________.

• A) cheap; low
• B) expensive ; low
• C) cheap; high
• D) expensive; high

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Definitions:

Predetermined Fixed Manufacturing Overhead Rate

A rate used to allocate fixed manufacturing overhead to products based on a predetermined activity level.

Fixed Manufacturing Overhead Budget Variance

The difference between the actual fixed manufacturing overhead costs and the budgeted fixed overhead costs.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead incurred during production and the standard cost of variable overhead allocated for the actual production volume.

Fixed Overhead Volume Variance

The difference between the budgeted and actual fixed overhead costs, attributed to the variance in the volume of production.