Bookkeeping

You can envision the potential problems in creating an overhead allocation rate within these circumstances. If an actual rate is computed monthly or quarterly, seasonal factors in overhead costs or in the activity base can produce fluctuations in the overhead rate. For example, the costs of heating and cooling predetermined overhead rate example a factory […]

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As with most financial metrics, a company’s turnover ratio is best examined relative to similar companies in its industry. For example, a company’s payables turnover ratio of two will be more concerning if virtually all of its competitors have a ratio of at least four. In some cases, cost of goods sold (COGS) is used

However, the amount of up-front cash payments to suppliers is normally so small that this modification is not necessary. The cash payment exclusion may be necessary if a company has been so late in paying suppliers that they now require cash in advance payments. Like all ratios, looking at only at account payable turnover ratio