Leverage Is Thought to Be

question 62

Multiple Choice

Leverage is thought to be:

• A) a dangerous tool, especially for big companies who do not understand its risk.
• B) the most widely used of hedging risk in markets.
• C) the single reason for the Great depression.
• D) a relatively riskless strategy used by companies to grow quickly.

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Definitions:

Labor Efficiency Variance

The difference between the actual hours worked and the standard hours expected, multiplied by the standard labor rate.

Direct Materials Purchases Variance

The difference between the actual cost of direct materials purchased and the expected cost of direct materials, based on standard cost.

Standard Direct Labor-Hours

The predetermined amount of labor time estimated or expected to produce a unit of output, used for budgeting and measuring efficiency.

Labor Rate Variance

The difference between the actual cost of labor and the budgeted or standard cost of labor.