The Constant Ratio Forecasting Method Makes Projections Based on the Assumption

question 4

True/False

The constant ratio forecasting method makes projections based on the assumption that certain costs and some balance sheet items are best expressed as a percentage of sales.

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Definitions:

Variable Overhead

The portion of overhead costs that varies directly with production volume.

Variable Overhead Rate Variance

The variance between the expected variable overhead according to standard cost and the actual variable overhead costs incurred.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead costs and the standard cost of variable overheads for the actual production units.

Direct Labor-Hours

The total time worked directly on the manufacturing of products.