Different Divisions with Differing Lines of Business Use Different Costs

question 26

Multiple Choice

Different divisions with differing lines of business use different costs of capital because their cost of equity is different and also because the ________ could be different.

• A)optimal volatility
• B)optimal current ratio
• C)optimal asset mix
• D)optimal debt-equity ratio
• E)cost of debt

Understand how to construct and evaluate generalizations in the context of empirical evidence.

Apply the method of difference to identify causal relationships.

Analyze the role of disconfirming evidence in strengthening generalizations.

Understand how the method of concomitant variations contributes to identifying causal relations.

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Definitions:

Labour Efficiency Variance

A metric that assesses the difference between the expected amount of labor time to produce a given level of output and the actual labor time used.

Labour Rate Variance

The difference between the actual wage rate paid to workers and the expected (or standard) wage rate, multiplied by the actual hours worked.

Direct Labour Costs

Costs that can be directly attributed to the production of goods or services, such as wages for workers manufacturing a product.

Variable Overhead Spending Variance

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