When Examining an External Financial Report, a Ratio That Can

question 33

Multiple Choice

When examining an external financial report, a ratio that can be useful in determining the approximate age of the assets is:

• A) accumulated depreciation/average recorded property, plant and equipment at cost.
• B) net sales/average total assets.
• C) average total assets/net sales.
• D) net sales/ average property, plant and equipment.

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Definitions:

Standard Cost System

This system assigns predetermined costs to the manufacture of products and services, used for budgeting and controlling expenses.

Fixed Manufacturing Overhead Rate

A constant charge that represents the total fixed manufacturing overhead costs divided by the standard allocation base.

Variances

The difference between planned or expected financial outcomes and the actual results achieved, often analyzed in budgeting and cost control.

Direct Labor-Hours

The number of hours spent by workers producing a company's goods, a measure of direct labor input.