Which Ratio Would Be Considered an Activity Ratio

question 7

Multiple Choice

Which ratio would be considered an activity ratio?

• A) debt-to-equity
• B) net profit margin
• C) average collection period
• D) earnings per share
• E) current ratio

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Definitions:

Activity-Based Costing

A costing method that assigns overhead and indirect costs to related products and services based on the activities that drive costs.

Overhead Applied

The portion of overhead costs allocated to individual products or job orders based on a predetermined rate or method.

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific products or projects based on their use of activities, providing more accurate cost information.

Total Overhead Applied

The total amount of indirect manufacturing costs allocated to units of product based on a predetermined rate.