Using Vertical Analysis of the Income Statement a Company's Net

question 88

True/False

Using vertical analysis of the income statement a company's net income as a percentage of net sales is 10%; therefore the cost of goods sold as a percentage of sales must be 90%.

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Definitions:

Production Constraint

A limitation or bottleneck in a manufacturing process that affects the overall output.

Contribution Margin Ratios

The proportion of sales revenue that remains after variable costs are subtracted, indicating how well a company can cover fixed costs and generate profits.

Constrained Resource

A factor within a production or operation process that limits the overall output, such as limited machinery, labor, or materials.

Direct Labour-Hours

The total hours worked by employees directly involved in the manufacturing process, used as a basis for assigning labor costs to products.