Which One of the Following Correctly Defines the Retention Ratio

question 19

Multiple Choice

Which one of the following correctly defines the retention ratio?

• A) one plus the dividend payout ratio
• B) additions to retained earnings divided by net income
• C) additions to retained earnings divided by dividends paid
• D) net income minus additions to retained earnings
• E) net income minus cash dividends
• F) None of the above.

---

Definitions:

Predetermined Overhead Rate

A rate calculated before a period begins, based on the estimated overhead costs and activity levels, used to allocate overhead costs to products.

Direct Materials Cost

The cost of raw materials that are directly used in the production of goods, which is easily traceable to the finished product.

Direct Labor Wage Rate

The hourly wage rate paid to workers directly involved in the production of goods or services.

Predetermined Overhead Rate

A calculated rate used to assign overhead costs to products or services, based on estimated overhead and estimated activity base.