Advocates of Throughput Costing Maintain That

question 51

Multiple Choice

Advocates of throughput costing maintain that:

• A)both variable and fixed are necessary to produce goods; therefore, both types of costs should be inventoried
• B)all manufacturing costs plus some design costs should be inventoried
• C)fixed manufacturing costs are related to the capacity to produce rather than to the actual production of specific units
• D)Both A and C are correct.

---

Definitions:

Working Capital

The variance between a business's immediate assets and its short-term obligations, signalling its ability to meet short-term debts.

Current Ratio

A financial liquidity ratio that compares a company's current assets to its current liabilities.

Accounts Receivable Turnover

A financial ratio that measures how efficiently a company collects on its credit sales by comparing net credit sales with the average accounts receivable over a period.

Return On Total Assets

A financial ratio that measures a company's net income relative to its total assets, indicating how efficiently management is using its assets to generate profit.