Favorable Volume Variances May Be Harmful When

question 36

Multiple Choice

Favorable volume variances may be harmful when:

• A) machine repairs cause work stoppages.
• B) supervisors fail to maintain an even flow of work.
• C) production in excess of normal capacity cannot be sold.
• D) there are insufficient sales orders to keep the factory operating at normal capacity.

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Definitions:

Tax Rate

The proportion of income that is taken as tax from a person or business.

Goodwill

An intangible asset that arises when a company acquires another business for more than the fair value of its net assets, representing future economic benefits.

Deferred Income Tax Liability

A financial accounting term representing taxes that are owed but not yet paid, resulting from temporary differences between the IRS and accounting methods.

Income Tax Rate

The fraction of one's earnings or a company's profits that must be paid in taxes.