In 2018,Spirit Company's Net Income Was 10% of Net Sales

question 140

True/False

In 2018,Spirit Company's net income was 10% of net sales revenue.In 2019,the net income was 5% of net sales revenue.There is no need for investors to be alarmed because a drop from 10% to 5% is not significant.

---

Definitions:

Direct Materials

Raw materials that can be directly attributed to the production of specific goods or services.

Allowances For Spoilage

Financial adjustments made for the anticipated loss of goods due to spoilage during production or storage.

Inefficiency

The lack of ability or effectiveness to transform inputs into outputs in a cost-effective manner, often resulting in wasted resources.

Practical Standard

An achievable standard that takes into consideration normal working conditions and expected operational inefficiencies.