BGL Enterprises Increases Its Operating Efficiency Such That Costs Decrease

question 18

Multiple Choice

BGL Enterprises increases its operating efficiency such that costs decrease while sales remain constant. As a result,given all else constant,the:

• A) return on equity will increase.
• B) return on assets will decrease.
• C) profit margin will decline.
• D) equity multiplier will decrease.
• E) price-earnings ratio will increasE.

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Definitions:

Labor Efficiency Variance

The variance between the number of hours actually worked and the expected standard hours needed to achieve a specific output level, calculated using the standard labor rate.

November

The eleventh month of the Gregorian calendar, often associated with autumn in the Northern Hemisphere and spring in the Southern Hemisphere.

Labor Rate Variance

This measures the difference between the actual wages paid to workers and the expected wages as per standard cost for the actual labor hours worked.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected overhead based on standard costs.