Which Ratio Would Be Most Helpful to a Business Owner

question 22

Multiple Choice

Which ratio would be most helpful to a business owner to measure the profit per dollar of sales?

• A)Net sales to total assets
• B)Net sales to working capital
• C)Net profit on sales
• D)Net profit to equity

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Definitions:

Predetermined Overhead Rate

An estimated rate used to assign manufacturing overhead costs to products based on a specific activity base, like machine hours or labor hours.

Direct Labour-Hours

The total man-hours expended by workers directly involved in the manufacturing process.

Manufacturing Overhead

All indirect costs associated with manufacturing, such as indirect materials, indirect labor, and other factory-related expenses.

Job-Order Costing

A costing method used to determine the costs associated with manufacturing products individually or in batches, tracking the direct materials, direct labor, and manufacturing overhead per job.