In the Application of "Variable Costing" as a Cost-Allocation Process

question 131

Multiple Choice

In the application of "variable costing" as a cost-allocation process in manufacturing,

• A)variable direct costs are treated as period costs.
• B)nonvariable indirect manufacturing costs are treated as product costs.
• C)variable indirect manufacturing costs are treated as product costs.
• D)nonvariable direct costs are treated as product costs.

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Definitions:

External Financing

Funds a company obtains from outside sources, like bank loans or selling shares, to finance its operations.

Pro Forma Statements

Financial statements that project a company's financial performance based on hypothetical scenarios or future projections.

Percentage of Sales Approach

A financial forecasting method where various financial statement items are predicted as a percentage of sales.

Retained earnings

Earnings accumulated by a company up to the present moment, subtracting any dividends or payouts made to investors.