Common-Size Financial Statements

question 94

Multiple Choice

Common-size financial statements:

• A)allow for an easy comparison of balance sheets and income statements across firms in the industry.
• B)provide quantitative clues about the direction that the firm is moving.
• C)are obtained by dividing all income statement accounts by net sales and all balance sheet accounts by total assets.
• D)All of these describe common-size financial statements.

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Definitions:

Direct Labor-Hours

The total hours worked directly on a manufacturing process or project.

Traditional Costing

An accounting method that allocates manufacturing overhead costs to products based on the volume of production resources consumed.

Direct Labor-Hours

A measure of the work done by employees directly involved in the manufacturing process, counted in hours.

Activity Cost Pools

A grouping of all costs associated with a specific activity, used in activity-based costing to more accurately allocate overhead costs.