When Creating the Pro Forma Income Statement,the Owner Needs to Translate

question 19

Multiple Choice

When creating the pro forma income statement,the owner needs to translate the target profit into a net sales figure.To do this,the owner needs:

• A)to operate the business for one to two years to build a record.
• B)published statistics for his/her specific type of business.
• C)to divide actual net sales by the net profit projected.
• D)a sales forecast,the amount of retained earnings,and current depreciation on assets.

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Definitions:

Direct Labor-Hours

The hours worked by employees directly involved in the production process.

Variable Overhead Efficiency Variance

A metric that measures the difference between the actual hours taken to produce something and the expected (standard) hours, multiplied by the variable overhead rate per hour.

Standard Machine-Hours

The allocated number of operating hours expected for machinery to achieve a set level of production under standard conditions.

Manufacturing Overhead

All indirect costs associated with the production process, such as salaries of supervisors and maintenance costs.