Analyzing Days Sales Outstanding (DSO)and the Aging Schedule Are Two

question 44

Multiple Choice

Analyzing days sales outstanding (DSO) and the aging schedule are two common methods for monitoring receivables.However,they can provide erroneous signals to credit managers when

• A) Customers' payments patterns are changing.
• B) Sales fluctuate seasonally.
• C) Some customers take the discount and others do not.
• D) Sales are relatively constant,either seasonally or cyclically.
• E) None of the above.

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Definitions:

High-Low Method

A technique used in cost accounting to determine the variable and fixed components of a company's cost structure by analyzing the highest and lowest levels of activity.

Variable Costs

Costs that change in proportion to the level of activity or volume of production in a company, such as raw materials and labor costs.

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the level of production or sales, such as rent, salaries, and loan payments.

Fixed Operating Expense

Financial obligations that stay the same irrespective of production or sales figures, encompassing rental charges, payroll, and insurance premiums.