An Adjustment Is Made to Net Income When Calculating Residual

question 2

Multiple Choice

An adjustment is made to net income when calculating residual income to remove

• A)noninterest-bearing current liabilities.
• B)interest and the related tax effect.
• C)financing costs that the manager is able to control.
• D)accounting distortions.

---

Definitions:

Price Variance

A measurement of the difference between the actual cost of a good or service and its expected cost.

Quantity Variance

The difference between the expected and actual quantities used or produced in a process.

Total Cost Variance

The difference between the actual cost and the standard cost of an operation, process, or product.

Direct Materials Price

The cost of raw materials and components required to produce a finished product.