The Principle of Conservatism Is Concerned with

question 149

Multiple Choice

The principle of conservatism is concerned with

• A)the avoidance of overstating assets or income in the preparation of financial statements.
• B)the minimization of costs associated with providing financial information.
• C)the company's ability to carry out its existing commitments.
• D)the company's procedures for recording activities at their initial exchange price.

---

Definitions:

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific activities, providing more accurate insights into the actual costs of production or services.

Machine-Hours

A measure of production time in hours by machines, used as a basis for allocating manufacturing overhead in cost accounting.

Activity Rate

The cost driver rate used in activity-based costing to allocate costs to products or services based on the activities required for their production or delivery.

Materials Handling

The process of moving, protecting, storing, and controlling materials and products in any form throughout the manufacturing and distribution process.