A Company Can Change to a New Accounting Principle If

question 32

Multiple Choice

A company can change to a new accounting principle if management can justify that the change will result in

• A)less likelihood of clerical errors.
• B)higher profit.
• C)lower profit for tax purposes.
• D)more relevant information for decision-making.

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Definitions:

Activity Rates

Charges or costs applied based on specific activities or drivers in cost accounting, used to allocate costs to products or services.

Wedding Cakes

A specialized product in the baking industry, often intricately designed and customized for individual wedding events.

Overall Margin

The ratio or percentage that represents the difference between a company’s sales and costs, indicating overall profitability.

Break Even

The point at which total costs and total revenues are equal, resulting in no net loss or gain.