If a Firm Has a Total Asset Turnover of 8

question 190

Multiple Choice

If a firm has a total asset turnover of 8 times and a return on total assets of 15%, its return on sales must be:

• A) 1.875%.
• B) 1.95%.
• C) 2.05%.
• D) None of the above

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Definitions:

Manufacturing Overhead

All indirect costs associated with the production process, such as utilities, maintenance, and salaries for employees not working directly on the product.

Direct Labor Cost

The total cost of all labor hours worked directly on the production of goods or services, excluding indirect labor costs.

Manufacturing Cost

The total expense incurred in producing a product, including the cost of direct materials, direct labor, and manufacturing overhead.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to individual products or job orders, calculated before the period begins based on the relationship between estimated annual overhead costs and estimated annual operating activity.