Refer to the Following Selected Financial Information from McCormik, LLC

question 8

Multiple Choice

Refer to the following selected financial information from McCormik, LLC. Compute the company's acid-test ratio for Year 2. $$\begin{array} { | l | r | r | } \hline & \text { Year 2 } & { \text { Year 1 } } \\\hline \text { Cash } & \$ 37,500 & 36,850 \\\hline \text { Short-term investments } & 90,000 & 90,000 \\\hline \text { Accounts receivable, net } & 85,500 & 86,250 \\\hline \text { Merchandise inventory } & 121,000 & 117,000 \\\hline \text { Prepaid expenses } & 12,100 & 13,500 \\\hline \text { Plant assets } & 388,000 & 392,000 \\\text { Accounts payable } & 113,400 & 111.750 \\\hline \text { Net sales } & 711,000 & 706,00 \\\hline \text { Cost of goods sold } & 390,000 & 385,500 \\\hline\end{array}$$

• A) 2.26.
• B) 1.98.
• C) 2.95.
• D) 3.05.
• E) 1.88.

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Definitions:

Volume-related Measures

Quantitative assessments related to the amount or size of something, especially used in the context of production and sales.

Overhead Costing Accuracy

The degree to which allocated overhead costs accurately represent the actual expenses incurred by the production process or specific products.

Plantwide Overhead Rate

An overhead allocation rate used throughout an entire plant or company to allocate indirect costs to products.

Overhead Allocation Base

A measure used to distribute overhead costs among various products or service units within a business.