Lone Star Has Computed the Following Unit Costs for the Year

question 37

Multiple Choice

Lone Star has computed the following unit costs for the year just ended: $$\begin{array} { l r } \text { Direct material used } & \$ 12 \\\text { Direct labor } & 18 \\\text { Variable manufacturing overhead } & 25 \\\text { Fixed manufacturing overhead } & 29 \\\text { Variable selling and administrative cost } & 10 \\\text { Fixed selling and administrative cost } & 17\end{array}$$ Under variable costing, each unit of the company's inventory would be carried at:

• A) $35.
• B) $55.
• C) $65.
• D) $84.
• E) None of the other answers are correct.

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Definitions:

Diversified Investors

Individuals or entities that spread their investments across various asset classes and sectors to minimize risk.

Risk-Return Tradeoff

The principle that potential return rises with an increase in risk; low levels of uncertainty (risk) are associated with low potential returns, whereas high levels of uncertainty (risk) are associated with high potential returns.

Capital Asset Pricing Model

An economic model used to determine the theoretical expected return of an asset, considering its risk relative to the market as a whole.

Unsystematic Risk

The risk that is unique to a specific company or industry.