Factors Affecting the Market Prices of Common Stocks

CASE 11.2
Factors Affecting the Market Prices of Common Stocks
Each of the following situations describes an event that affected the stock market price of a particular company.
a. The price of a common share of McDonnell Douglas, Inc., increased by over $5 per share in the several days after it was announced that Saudia Airlines would order $6 billion of commercial airliners from Boeing and McDonnell Douglas.

b. Citicorp’s common stock price fell by over $3.50 per share shortly after the Federal Reserve Board increased the discount rate by ¼ percent. The discount rate is the rate charged to banks for short-term loans they need to meet their reserve requirements.
c. The price of a common share of Ventitex, Inc., a manufacturer of medical devices, fell over $10 (27.7 percent) after it was announced that representatives of the Federal Drug Administration paid a visit to the company.
Instructions
For each of the independent situations described, explain the likely underlying rationale for the change in market price of the stock.

Question number # 2
Standard Cost Systems

Now that you have read about the different cost standards, computed all the different variances and determined if they are favorable or unfavorable, I want everyone to discuss how a company operating at 100% of capacity can create unfavorable variances?