A Company Can Pay for Its Expansion in All the Following

question 26

Multiple Choice

A company can pay for its expansion in all the following ways except:

• A) by using the earnings generated from its sale of obsolete equipment.
• B) by persuading a director's mother to make a personal loan to the company.
• C) by purchasing bonds in the secondary market.
• D)by selling stock certificates for a new subsidiary.

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Definitions:

Conversion Costs

The combined costs of direct labor and manufacturing overheads incurred to convert raw materials into finished goods.

Predetermined Overhead Allocation Rate

A calculated rate used to apply manufacturing overhead costs to specific jobs or production units based on estimated costs and activities.

Direct Labor Cost

The expense incurred by companies for wages, benefits, and other costs directly associated with the employment of workers who physically produce a product or service.

Equivalent Finished Units

A calculation in cost accounting that converts partially completed goods into a number of complete units for inventory costing purposes.