Final answer:
Earnings Flow Through % is calculated by assessing the incremental profit for additional dollar of sales, which involves dividing the change in profit by the change in sales. Option C from the provided choices is closest to this concept, using Performance Earnings and Net Sales relative to the previous year.
Step-by-step explanation:
To calculate Earnings Flow Through %, you typically assess the incremental profit for an additional dollar of sales. While the question lists several options, none of them are standard calculations of Earnings Flow Through %. However, going with the general understanding of earnings flow through within the context of business and financial analysis, it involves an evaluation of how earnings increase concerning additional revenues.
Usually, it is determined by taking the change in profit (Performance Earnings vs Last Year or Expected) and dividing it by the change in sales (Net Sales vs Last Year or Expected). Thus, none of the listed options directly represent this calculation, but option C is closest in terms of using components of the formula, as it considers Performance Earnings against Net Sales relative to the Last Year.
Earnings Flow Through is not directly related to average total cost, which is calculated by taking total cost and dividing by total output at different levels of output. Instead, it's more focused on the comparative performance year over year or against expectations. Knowing how to calculate and analyze Earnings Flow Through is essential for making informed financial decisions and understanding a firm's operational efficiency.