An Investor Receives a 15% Total Return by Purchasing a Stock

question 63

Multiple Choice

An investor receives a 15% total return by purchasing a stock for $40 and selling it after one year with a 5% capital gain.How much was received in dividend income during the year?

• A) $2.00
• B) $2.20
• C) $4.00
• D) $4.40

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Definitions:

Activity Variance

The difference between a revenue or cost item in the flexible budget and the same item in the static planning budget. An activity variance is due solely to the difference between the actual level of activity used in the flexible budget and the level of activity assumed in the planning budget.

Flexible Budget

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

Static Planning Budget

is a budget based on a fixed level of activity and does not change with actual activity levels, useful for planning but less so for performance evaluation.

Unfavorable Activity Variance

This term describes a situation where actual costs exceed the standards or budgeted amounts, leading to a negative variance.