I Using the Ratio-To-Moving-Average Method, Dividing the Actual Sales for a Month

question 83

Multiple Choice

i. Using the ratio-to-moving-average method, dividing the actual sales for a month by the typical seasonal for that month results in a figure that includes only trend, cycle and irregular fluctuations. This procedure is called deseasonalizing the sales. ii. The reason for deseasonalizing a sales series is to remove trend and cyclical fluctuations so that we can study seasonal fluctuations.
iii. Knowing the seasonal pattern in the form of indexes allows the retailer to deseasonalize sales.

• A) (i), (ii), and (iii) are all correct statements.
• B) (i) and (ii) are correct statements but not (iii).
• C) (i) and (iii) are correct statements but not (ii).
• D) (ii) and (iii) are correct statements but not (i).
• E) (i), (ii), and (iii) are all false statements.

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Definitions:

Standard Overhead Cost

The pre-determined or estimated cost of indirect expenses that a company expects to incur during a specific period.

Direct Labor Cost Variance

The difference between the budgeted cost of direct labor for production and the actual cost incurred, indicating over or under allocation of resources.

Direct Labor Rate Variance

The difference between the actual cost of direct labor and the expected (or standard) cost, indicating discrepancies in workforce expenses.

Direct Labor Efficiency Variance

A measure of the difference between the actual hours worked and the standard hours expected for the production accomplished.