To Be Useful,a Ratio Must Be Compared with the Same

question 50

True/False

To be useful,a ratio must be compared with the same ratio from previous periods,compared with ratios of other companies in the same industry,or compared with industry averages.

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Definitions:

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products or job orders, calculated by dividing estimated overhead costs by an allocation base, such as direct labor hours.

Denominator Level

A term used in cost accounting to represent the base level or quantity used in calculating rates, such as in the determination of overhead rates or per-unit costs.

Fixed Overhead

Regular, consistent costs incurred by a business that are not affected by the level of goods or services produced, such as rent and salaries.

Budget Variance

The difference between the budgeted or planned amount of expenses or revenues, and the actual amount incurred or earned.