Which of the Following Statements MOST Accurately Describes Asset Turnover

question 54

Multiple Choice

Which of the following statements MOST accurately describes asset turnover?

• A) How efficiently a division uses its average assets to generate sales
• B) How much operating income the division earns on every dollar of sales
• C) How much return a division generates on average assets
• D) How much extra income does a division generate above the minimum acceptable level

---

Definitions:

Variable Costing

A method of accounting that incorporates only the costs that vary with production into the cost of products, leaving out any fixed manufacturing overhead.

Absorption Costing

A fiscal recording method that consolidates every cost involved in manufacturing, which includes the price of direct materials, payments for direct labor, and total overhead costs, whether stable or fluctuating, into the cost allocated to a product.

Variable Costing

A costing method that incluonly direct materials, direct labor, and variable manufacturing overhead in product costs, excluding fixed manufacturing overhead.

Total Fixed Manufacturing Overhead

The sum of all costs related to manufacturing a product that do not change with the level of production, such as salaries of permanent staff and rent.