Which of the Following Statements Is True for a Firm

question 173

Multiple Choice

Which of the following statements is true for a firm that uses variable costing?

• A)The cost of a unit of product changes because of changes in the number of units manufactured.
• B)Profits fluctuate with sales.
• C)An idle facility variation is calculated.
• D)None of the above.

---

Definitions:

Predetermined Overhead Rate

A rate calculated before the period begins, used to allocate manufacturing overhead costs to individual units of production based on a specific activity base.

Direct Labor Costs

Expenses related to employees who are directly involved in the production of goods or services, as opposed to administrative or managerial staff.

Factory Overhead

Indirect costs associated with manufacturing, including utilities, maintenance, and salaries of supervisors, not directly involved in production.

Adjusting Journal Entry

A journal entry made at the end of an accounting period to record unrecorded income and expenses so that the financial statements are accurate.