Answer:
C. A capital expenditure.
Explanation:
This is an example of a capital expenditure as it makes significant improvements to the machines and extends the life considerably.
These types of expenses are capitalized in the balance sheets under the original asset name and the asset is revalued by the improvement cost and stated at net book value + improvement.
Revised depreciation is then calculated on this new NBV as applicable with increased life of asset.
Hope that helps.
Answer:
See below.
Explanation:
Total Variable over head variance = Spending variance + Efficiency variance
Total Spending variance = VOH - SVOR × AH
Total Efficiency variance = SVOR * ( AH - SH)
Assuming we only want total spending variance then option A is correct, however if we assume total overhead variance is required option E would be correct as we also need to account for the efficiency variance of overhead as per the difference between actual and standard hours worked.
Hope that helps.
Answer:
d. increases; increases
Explanation:
Leverage describes the method of capital acquisition. The term is used mostly to refer to the borrowing of capital. A highly leveraged business is a business that has a high percentage of debts.
Business borrows for expansion or to finance the acquisition of assets. By borrowing, the company increases its capacity to produce and consequently, the possibility of an increase in sales. An increase in output leads to high returns to the shareholders.
Higher returns can only be achieved if the market behaves as expected. If operations do not go as planned, then leverage will leave the shareholder exposed to higher risks. The losses likely to be suffered will be proportional to the level of leverage.