In a Labor-Intensive Company in Which More Overhead Is Used

question 99

Multiple Choice

In a labor-intensive company in which more overhead is used by the more highly skilled and paid employees, which activity base would be most appropriate for applying overhead to production?

• A) Direct labor cost.
• B) Direct material cost.
• C) Direct labor hours.
• D) Machine hours.

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Definitions:

Equity Multiplier

The equity multiplier is a financial ratio that measures a company's leverage by dividing its total assets by its total shareholders' equity, indicating how much of the assets are financed by equity.

Market-To-Book Ratio

A financial valuation metric comparing a company's stock market value to its book value.

Price-Earnings Ratio

A valuation metric that compares a company's share price to its per-share earnings, used to evaluate if a stock is over or under-valued.

Book Value Per Share

Book Value Per Share is a financial metric that measures a company's net asset value on a per-share basis, calculated by dividing total assets minus liabilities by the number of shares outstanding.