Suppose One Year Ago the Price Index Was 120 and Maria

question 72

Multiple Choice

Suppose one year ago the price index was 120 and Maria purchased $20,000 worth of bonds. One year later the price index is 126. Maria redeems his bonds for $22,250 and is in a 40 percent tax bracket. What is Maria's real after-tax rate of interest to the nearest tenth of a percent?

• A)4.3 percent
• B)3.1 percent
• C)1.8 percent
• D)1.2 percent

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Definitions:

Variable Overhead Efficiency Variance

A measure of the difference between the expected variable overhead based on standard costs and the actual variable overhead incurred.

Flexible Budget

A report showing estimates of what revenues and costs should have been, given the actual level of activity for the period.

Manufacturing Overhead

The sum of all costs involved in the production process other than direct materials and labor, such as utilities and rent for the manufacturing facilities.

Fixed Overhead Volume Variance

The difference between the budgeted and actual volume of units produced, multiplied by the standard fixed overhead rate.