Many Ratios Require an Average Be Used for the Balance

question 64

Multiple Choice

Many ratios require an average be used for the balance sheet numbers because the

• A)income statement refers to a point in time.
• B)accountants may have made errors in the financial statements.
• C)balance sheet numbers are at a point in time and are being compared to an income statement number that covers a period of time.
• D)income statement numbers represent a point in time and are being compared to a balance sheet number that covers a period of time.

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Definitions:

Labor Efficiency Variance

The difference between the actual labor hours worked and the standard labor hours expected for the level of production achieved.

Labor Rate Variance

Labor Rate Variance is the difference between the actual cost of labor and the budgeted or standard cost, often highlighting discrepancies in wage rates or work mix.

Work in Process

A category of inventory referring to materials and products that are in the process of being manufactured but are not yet complete.

Raw Materials

Basic materials and inputs used in the production of goods and services.