Variance Analysis Compares

question 34

Multiple Choice

Variance analysis compares:

• A) practical standards and ideal standards.
• B) static budgets and flexible budgets.
• C) standard costs and actual costs.
• D) product costs and period costs.

Understand how to calculate various financial ratios, such as debt-to-equity, equity ratio, debt ratio, and times interest earned.

Ability to compute turnover ratios, including accounts receivable turnover, inventory turnover, and days' sales in inventory.

Learn how to compute liquidity ratios, specifically the current ratio and acid-test (quick) ratio.

Interpret and calculate performance measures such as profit margin and return on total assets.

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Definitions:

Surplus

A situation where the quantity of a good or service supplied exceeds the quantity demanded at the current price.

Substitution Effect

The economic concept that as prices rise (or incomes decrease), consumers will replace more expensive items with cheaper alternatives, holding utility constant.

Relative Price

Relative price is the price of one good or service compared to another, essentially indicating the trade-off between choosing one over the other.

Price Increases

Price Increases involve a rise in the cost of goods or services over time, often measured by inflation rates.