Morrison Motors Has Total Equity of $289,100 and Net Income

question 39

Multiple Choice

Morrison Motors has total equity of $289,100 and net income of $64,500. The debt-equity ratio is 0.45 and the total asset turnover is 1.6. What is the profit margin?

• A) 3.10 percent
• B) 5.23 percent
• C) 5.67 percent
• D) 8.21 percent
• E) 9.62 percent

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Definitions:

Variable Factory Overhead Controllable Variance

The difference between actual variable overhead incurred and the expected (or budgeted) variable overhead based on standards set by management.

Standard Labor Hours

The estimated amount of time expected to produce a unit of output under normal conditions.

Overhead

Indirect costs related to the day-to-day running of a business, excluding direct costs like labor and materials.

Unfavorable Volume Variance

A cost variance that occurs when the actual volume of production or sales negatively deviates from expected volumes, often leading to higher costs or lower profits.