How Share Buy-Backs Differ from Dividends: You Purchased 3,000 Shares

question 16

Multiple Choice

How share buy-backs differ from dividends: You purchased 3,000 shares of Space Paranormal Co. four years ago at $40 per share You have just received a mailing from the company announcing a share buy-back at $70 per share. Capital gains are taxed at 20 per cent. If you participate in the buy-back, how much will you receive?

• A) $72,000
• B) $192,000
• C) $186,000
• D) $210,000

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Definitions:

Manufacturing Overhead Applied

The portion of manufacturing overhead costs assigned to individual cost objects based on a predetermined rate or method.

Total Manufacturing Costs

The sum of all costs directly involved in the production of goods, including raw materials, labor, and overhead.

Predetermined Overhead Rate

A rate used to apply manufacturing overhead to products or job orders, calculated before the period begins based on estimated costs and activity levels.

Work in Process Inventory

is the account for materials and labor costs for products that are in the process of being manufactured but are not yet complete.