Practical Capacity Is Based on Which of the Following Assumptions

question 70

Multiple Choice

Practical capacity is based on which of the following assumptions?

• A)that absorption costing is used
• B)that variable costing is used
• C)Production will occur at peak efficiency all the time.
• D)Production will occur at peak capacity where feasible (e. g., except for maintenance downtime, repairs, holidays, etc.).
• E)Production can never occur at peak capacity.

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Definitions:

Investment Turnover

A ratio measuring how efficiently a company generates sales from its inventory investments.

Profit Margin

A financial metric expressing the percentage of revenue that remains as profit after all operating expenses are deducted.

Return on Investment

A financial metric used to measure the efficiency of an investment, calculated by dividing the profit gained from the investment by its cost.

Residual Income

The amount of income that an individual has after all personal debts and expenses have been paid, often used in corporate finance to measure the excess of actual profit over the expected return on investment.