Overhead Efficiency Variances

question 46

Multiple Choice

Overhead efficiency variances:

• A) Provide managers with useful information for cost management
• B) Do not provide marginal information for cost management because they involve estimates
• C) Do not provide new cost management information because direct cost efficiency variances provide the same information
• D) Provide useful information for financial reporting purposes

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Definitions:

Net Purchases

The total amount of purchases after subtracting any returns, allowances, and discounts over a specific period.

Purchase Returns

Occurs when a buyer returns merchandise that it had purchased from a supplier, often due to issues like defects or dissatisfaction.

Purchase Discounts

Reductions in the purchase price of goods, often granted by suppliers for early payment.

Profit Margin

The percentage difference between a product's selling price and the cost to produce it, indicating the financial health and profitability of a business.