Data for Morton Co:
Prime Cost Was A)£300,000

question 23

Multiple Choice

Data for Morton Co:
Prime cost was:
$\begin{array}{lrr} \text { Direct materials } &£300,000\\ \text { Direct labour } &400,000\\ \text { Manutacturing overhead: } &\\ \text {variable. } &80,000\\ \text {Fixed } &50,000\\\end{array}$

• A)£300,000.
• B)£380,000.
• C)£700,000.
• D)£830,000.

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Definitions:

Leverage

Use of borrowed capital for investment with the aim to multiply the potential returns, while also increasing the risk of loss.

Independence Hypothesis

In capital structure theory, the original restrictive model by Modigliani and Miller that shows stock price to be independent of capital structure.

Modigliani

Refers to Franco Modigliani, an economist known for his work on the Modigliani-Miller theorem, which addresses the valuation of stocks and corporate taxes.

Miller

Miller refers to the Miller Modigliani theorem or Miller's theory, which deals with the capital structure of a company and the relationship between the return required by investors and the company's equity and debt.