Financial Information Exhibits the Characteristic of Consistency When

question 129

Multiple Choice

Financial information exhibits the characteristic of consistency when

• A) expenses are reported as charges against revenue in the period in which they are paid.
• B) a company applies the same accounting treatment to similar events, from period to period.
• C) extraordinary gains and losses are not included on the income statement.
• D) accounting procedures are adopted which give a consistent rate of net income.

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Definitions:

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate manufacturing overhead costs to products based on a specific activity base.

Manufacturing Overhead

Indirect costs related to manufacturing, such as utilities, maintenance, and salaries for managers, not directly involved in production.

Variable Manufacturing Overhead

Costs in the production process that vary with the level of output, such as utilities for machinery.

Fixed Manufacturing Overhead

The total of all costs that remain constant regardless of the level of production or sales, in the context of manufacturing operations.