For Each Independent Situation Given Below, Determine the Effect on Pretax

question 14

Essay

For each independent situation given below, determine the effect on pretax income for each. Enter "O" to indicate pretax income is overstated, "U" to indicate pretax income is understated, or "NA" to indicate that pretax income is not affected.

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Definitions:

Fixed Manufacturing Overhead

Regular, unchanged costs incurred during the manufacturing process, regardless of production volume, such as salaries of permanent staff and rent.

Financial Advantage

The benefit gained in monetary terms from a certain business activity or financial decision.

Fixed Manufacturing Overhead

Costs that do not vary with the level of production, such as rent, insurance, and salaries for managers.

Contribution Margin

What’s left of the sales proceeds once variable expenditures are taken out.