Which of the Following Might an Analyst Not Want to Eliminate

question 19

Multiple Choice

Which of the following might an analyst not want to eliminate from past earnings when using past earnings to forecast future earnings?

• A) Nonrecurring gains from the sale of assets
• B) Unusual asset impairment charges
• C) Nonrecurring restructuring charges
• D) Revenue from the sale of inventory

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Definitions:

Overhead Rate

The ratio used to allocate indirect costs to products or activities, often based on labor hours, machine hours, or material costs, facilitating overhead application.

Actual Costs

The genuine costs incurred for materials, labor, and overhead in the production process or in providing a service.

Fixed Manufacturing Overhead

Costs that remain constant in total regardless of the level of production, such as salaries and rent for factory buildings.

Predetermined Overhead Rate

A rate used to apply manufacturing overhead to products or services, calculated before the accounting period begins based on estimated costs.