Common-Size Analysis Requires the Analyst to Be Aware That Percentages

question 7

Multiple Choice

Common-size analysis requires the analyst to be aware that percentages can change because of all of the following except:

• A) changes in expenses in the numerator independent of changes in sales
• B) changes in sales independent of changes in expenses
• C) interaction effects between the numerator and denominator
• D) All of these are possible explanations.

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Definitions:

Manufacturing Overhead Rate

A calculation used in costing that allocates indirect manufacturing costs to products based on a predetermined factor, such as machine hours or labor costs.

Machine-Hours

A measure of production time that quantifies the number of hours a machine is in operation, used for allocating manufacturing costs related to machinery use.

Manufacturing Departments

Divisions within a manufacturing facility, each specialized in a particular aspect of the production process.

Overhead Rate

The rate at which indirect manufacturing costs are allocated to products or services.