An Asset Turnover Ratio of 1

question 98

Multiple Choice

An asset turnover ratio of 1.75 can be interpreted as:

• A) $1.75 in sales are generated for every $1.00 of assets.
• B) $1.75 in additional assets are generated for every $1.00 of sales.
• C) $1.75 in assets are used to generate $1.00 of sales.
• D) $1.00 in sales are used to generate $1.75 in assets.

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Definitions:

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to products, calculated at the beginning of an accounting period.

Manufacturing Overhead

All indirect costs associated with manufacturing, including equipment maintenance, utilities, and factory management salaries.

Estimated Total

A calculated approximate value representing the total amount or quantity of something, often used in planning or forecasting.

Predetermined Overhead Rate

An estimated overhead rate used to allocate manufacturing overhead costs to products or job orders, calculated before the costs are incurred.