The Performance Measure That Uses After-Tax Operating Income and the Actual

question 98

Multiple Choice

The performance measure that uses after-tax operating income and the actual cost of capital employed is

• A) return on investment (ROI).
• B) residual income.
• C) economic value added (EVA).
• D) margin.
• E) turnover.

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Definitions:

Predetermined Overhead Rate

A rate calculated before the period begins, used to allocate manufacturing overhead to products based on a specific activity base.

Volume Variance

The difference between planned production volumes and actual production volumes, and its effect on budgeted costs.

Variable Overhead

Costs that fluctuate with changes in production level or activity, such as utilities or materials, within the manufacturing overhead category.

Rate Variance

It is the difference between the actual rate paid for an item or service and the expected (standard or budgeted) rate, often used in budgeting and cost management.