If a Cumulative Effect Type Accounting Change Is Made During

question 40

Multiple Choice

If a cumulative effect type accounting change is made during the first interim period of a year:

• A) no cumulative effect of the change should be included in net income of the period of change.
• B) the cumulative effect of the change on retained earnings at the beginning of the year should be included in net income of the first interim period.
• C) the cumulative effect of the change should be allocated to the current and remaining interim periods of the year.
• D) none of these.

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Definitions:

Marginal Cost

The financial increment incurred by the production of an extra unit of a product or service.

Average Total Cost

It refers to the total cost per unit of output, calculated by dividing the total cost of production by the number of units produced.

Efficient Mix

An allocation of resources that maximizes the total utility to society, where no individual can be made better off without making someone else worse off.

Potentially Efficient

A state in which resources could be utilized in a way that maximizes the net benefits to society or an economy, although not necessarily currently achieved.