The Maintenance Expenses of a Company Are to Be Analyzed

question 109

Multiple Choice

The maintenance expenses of a company are to be analyzed for purposes of constructing a flexible budget.Examination of past records disclosed the following costs and volume measures: Highest and Lowest: Cost per month $20,000 and $14,000;Machine hours 55,000 and 35,000.
Using the high-low-point method of analysis,the estimated variable cost per machine hour is:

• A)$0.40
• B)$0.25
• C)$0.30
• D)$0.35
• E)$0.70

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Definitions:

Market Risk

The risk of losses in investments due to factors that affect the overall performance of the financial markets, such as economic changes or natural disasters.

Purchasing Power Risk

The risk that the value of money will decrease over time due to inflation, affecting the real value of investments and savings.

Investment Principal

A sum of money invested initially in a financial instrument or vehicle, which serves as the base on which returns or interest is calculated.

Passive Asset Allocation

An investment strategy that aims to build a portfolio mimicking a market index's composition, requiring minimal buying and selling.