The cost allocation method utilized affects the amount of net property, plant, and equipment that is used in the computation of the fixed asset turnover ratio.

Question

Quizplus · Accepted Answer

The cost allocation method affects the amount of depreciation expense, which is subtracted from gross property, plant, and equipment to arrive at net property, plant, and equipment. The fixed asset turnover ratio uses net property, plant, and equipment in its computation, so the cost allocation method indirectly affects the ratio.

The Cost Allocation Method Utilized Affects the Amount of Net