The Expenditure Line

question 142

Multiple Choice

The expenditure line

• A)is steeper than the 45-degree line.
• B)slopes upward because consumption depends positively on income.
• C)slopes upward because the MPC is less than 1.
• D)slopes upward because consumption and investment depend positively on income.
• E)shows the relationship between consumption spending and income.

Interpret the significance of favorable and unfavorable variances in standard costing.

Differentiate between fixed and variable overhead costs and their impact on costs control.

Demonstrate knowledge of how standard costs and variances are used in decision-making by management.

Analyze and report variances to appropriate stakeholders for further action.

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Definitions:

Overhead Applied

The portion of estimated overhead costs that is allocated to each unit of production or activity based on a predetermined rate.

Activity-Based Costing

An accounting method that assigns costs to products and services based on the resources they consume. This approach seeks to provide more accurate cost information by attributing overhead costs to specific activities.

Overhead Assigned

The allocation of indirect costs to specific products, services, or activities within a business.

Traditional Costing

A costing methodology that allocates manufacturing overhead based on volume-related measures such as labor hours or machine hours.