Metro Corporation Uses a Predetermined Overhead Rate of $20 Per

question 30

Multiple Choice

Metro Corporation uses a predetermined overhead rate of $20 per machine hour. In deriving this figure, the company's accountant used:

• A) a denominator of budgeted machine hours for the current accounting period.
• B) a denominator of actual machine hours for the current accounting period.
• C) a denominator of actual machine hours for the previous accounting period.
• D) a numerator of budgeted machine hours for the current accounting period.
• E) a numerator of actual machine hours for the current accounting period.

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Definitions:

M&M Proposition I

A theory stating, under certain conditions, that the value of a firm is unaffected by how it is financed, whether through debt or equity.

Interest Tax Shield

The reduction in income taxes that results from taking a deductible charge, such as interest on debt, reducing taxable income.

Tax

Compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Capital Structure

The mix of different forms of external funds and equity used by a firm to finance its overall operations and growth.