The target annual operating income is divided with invested capital to calculate _____________?
Correct answer: C. target rate of return on investment
- A. operating cost per unit
- B. operating income per unit
- C. target rate of return on investment
- D. cost of goods sold
Explanation
Dividing target operating income by invested capital gives the target return on investment, usually expressed as a percentage. The other choices measure unit costs or total cost rather than profitability relative to investment.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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