Other Things Held Constant,a Decline in Sales and a Simultaneous

question 86

True/False

Other things held constant,a decline in sales and a simultaneous increase in financial leverage must result in a lower profit margin.

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Definitions:

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to individual units of production, calculated before the period begins.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the standard cost allocated to production, based on the actual hours worked.

Machine-Hours

A measure of production time, calculated by the number of hours machines are operating in the manufacturing process.

Budget Variance

The difference between budgeted figures and actual figures for a particular accounting category.