The Accounting Rate of Return Is Calculated As

question 129

Multiple Choice

The accounting rate of return is calculated as:

• A) The after-tax income divided by the total investment.
• B) The after-tax income divided by the annual average investment.
• C) The cash flows divided by the annual average investment.
• D) The cash flows divided by the total investment.
• E) The annual average investment divided by the after-tax income.

---

Definitions:

Direct Materials Price Variance

The difference between the actual cost and standard cost of direct materials used in production, indicating how effectively a company is purchasing its raw materials.

Data Collected

Information gathered through observation, experimentation, surveys, or other methods, which can be analyzed to gain insights or make decisions.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes to covering fixed costs and generating profit.

Fixed Costs

Costs that do not vary with production or sales levels, including rent, insurance, and salaries, which remain constant regardless of business activity levels.