Your Company Orders and Broadcasts a 30 Second Ad During

question 111

Multiple Choice

Your company orders and broadcasts a 30 second ad during the Super Bowl for $1.2 million.It is legally obligated to pay for the ad but has not yet done so.

• A)This is an internal event and it does NOT affect the balance sheet.
• B)This is an external event and it does NOT affect the balance sheet.
• C)This is an internal event that affects the balance sheet.
• D)This is an external event that affects the balance sheet.

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Definitions:

Absorption Costing

A method of costing that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - as part of the cost of a product.

Variable Costing

A costing method that includes only variable production costs (direct material, direct labor, and variable manufacturing overhead) in product costs.

Net Operating Income

A company's total earnings from its operations, excluding non-operating income and expenses, interest, and taxes.

Absorption Costing

This accounting strategy entails calculating a product's cost by including all costs related to its manufacturing, comprising direct materials, direct labor, and all categories of manufacturing overhead, both variable and fixed.