Which of the Following Approaches Best Indicates How EPS Should

question 14

Multiple Choice

Which of the following approaches best indicates how EPS should be computed? Take after-tax net income and divide by:

• A) current common shares outstanding.
• B) previous years common shares outstanding.
• C) treasury shares outstanding.
• D) average common shares outstanding.

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Definitions:

Standard Cost Card

A document that lists the standard costs associated with producing a unit of product, including materials, labor, and overhead.

Fixed Manufacturing Overhead

Costs that do not vary with the level of production or sales, such as salaries of production supervisors and depreciation of factory equipment.

Direct Labor Costs

Expenses related to labor that is directly involved in the production of goods or the provision of services.

Predetermined Overhead Rate

An estimated rate used to assign manufacturing overhead costs to products, calculated before the accounting period starts.