Operating Profit Calculations DO NOT Use

question 27

Multiple Choice

Operating profit calculations DO NOT use:

• A)operating costs.
• B)income tax expense.
• C)cost of goods sold.
• D)revenue.

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Definitions:

Fixed Costs

Costs that do not vary with the level of production or sales over a short period, such as rent, salaries, and insurance.

Estimated Activity

The projected level of activity used to allocate overhead costs, often based on metrics such as machine hours or labor hours.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate manufacturing overhead to products based on a relevant activity base.

Direct Labor-Hours

The total hours worked by employees directly involved in the production of goods.