Company X Has a P/E Ratio of 16 in Year

question 23

Multiple Choice

Company X has a P/E ratio of 16 in year 2009 and 16.5 in 2010.In 2011 its P/E ratio is 24.The best way to interpret these data is to conclude that:

• A)the shares are overpriced and should be sold.
• B)the shares have great growth capacity and should be bought.
• C)other financial results and news should be examined to determine the cause of the P/E ratio change.
• D)the shares are under-priced and should be bought.

Analyze the impact of variable and fixed manufacturing overhead variances.

Recognize how standard costing systems apply fixed and variable manufacturing overhead costs to products.

Evaluate the financial implications of failing to meet target activity levels.

Determine and interpret fixed manufacturing overhead budget and volume variances.

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Definitions:

Activity-Based Costing

A costing method that allocates overhead and indirect costs to specific activities, providing more accurate product costing.

Direct Labor Rate

The cost of the work done by those employees who directly manufacture the products, usually measured per hour.

Direct Materials Cost

The expense associated with acquiring raw materials that are directly utilized in the manufacture of goods.

Traditional Costing

Traditional costing is an accounting method that allocates manufacturing overhead based on volume-related measures, such as direct labor hours or machine hours.