Lease Obligations Are Included in Certain Leverage Ratios Because Leases

question 30

Multiple Choice

Lease obligations are included in certain leverage ratios because leases:

• A)Require the payment of interest
• B)Represent long-term fixed obligations
• C)Must be financed through a bank
• D)Are a measure of efficiency, just like debt

---

Definitions:

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products or job orders.

Machine-Hours

The total time machines are operated within a certain period, often used to allocate manufacturing overhead.

Manufacturing Overhead

All manufacturing costs that are not directly associated with the production of goods, such as salaries of supervisors and the cost of factory utilities.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products or job orders based on a specific activity base.