Under Statement of Financial Accounting Concepts No

question 33

Multiple Choice

Under Statement of Financial Accounting Concepts No. 8, which of the following is an ingredient of the primary quality of faithful representation?

• A) Understandability
• B) Completeness
• C) Predictive value
• D) Materiality

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Definitions:

Activity Base

A measure used for allocating costs to a product or service, typically based on the extent to which the product or service uses that activity.

Predetermined Overhead Rate

An estimated rate used to assign overhead costs to products or job orders, based on a particular activity base, before the actual costs are known.

Underapplied Overhead

A condition where the allocated manufacturing overhead is less than the actual overhead costs incurred, leading to a shortfall.

Overapplied Overhead

Occurs when the allocated manufacturing overhead costs for a period exceed the actual overhead costs incurred.