One Reason Why Capacity Costs Should Be Allocated Among Products

question 43

Multiple Choice

One reason why capacity costs should be allocated among products is that:

• A) It allows management to estimate changes in capacity costs over the long run
• B) It assists in making decisions specifically for the short-term
• C) It follows the rules for utilizing variable costing
• D) It separates product costs from period costs

Understand the principles of accrual basis accounting.

Recognize the importance of the adjusting process in accounting.

Identify and explain the different types of adjustments, including accruals and deferrals.

Understand the revenue recognition and matching principles.

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Definitions:

Positive Statements

Claims that attempt to describe the world as it is.

Normative Statements

Claims that attempt to prescribe how the world should be.

Normative Statements

Claims that express judgments about what ought to be, incorporating opinions and values rather than factual assertions.

Positive Statements

Factual statements about the world that can be tested and validated; they describe "what is" rather than "what ought to be."