Which One of the Following Statements Is True

question 39

Multiple Choice

Which one of the following statements is true?

• A) The activity method of computing depreciation could result in zero depreciation expense in some periods of time.
• B) If the activity method is in use, residual value should not be subtracted from cost to determine the depreciation base.
• C) The activity method produces a constant total cost of depreciation each period.
• D) The activity method should be used when the service life of the asset is affected mostly by the passage of time.

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Definitions:

Direct Materials

Raw materials that can be directly traced to the manufacturing of a product in a cost-effective manner.

Manufacturing Overheads

Indirect costs related to manufacturing that cannot be directly traced to specific products, including utilities, maintenance, and factory equipment depreciation.

Work-in-Process Inventory

Items that are partially completed in the production process; they are not yet finished goods but are no longer raw materials.

Schedule of Cost of Goods Sold

A detailed statement showing the direct costs, indirect costs, and total cost of goods that have been sold during a specific period.