XYZ Decided to Change Its Depreciation Policy by (1)discontinuing to Record

question 84

Multiple Choice

XYZ decided to change its depreciation policy by (1) discontinuing to record depreciation on land, and (2) changing the estimated useful life on all autos used in the business from five years to four years.Choose the correct statement concerning these two changes:

• A)Both are error corrections.
• B)Both are changes in estimate.
• C)One is an error correction, and one is a change in principle.
• D)Both are changes in accounting principle.
• E)One is an error correction, and one is a change in estimate.

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Definitions:

Standard Cost

A predetermined or budgeted cost of manufacturing a product or performing a service, used as a benchmark to measure performance.

Direct Materials Quantity Variance

The difference between the actual quantity of direct materials used in production and the standard quantity expected, multiplied by the standard cost per unit.

Direct Materials Price Variance

It measures the difference between the actual cost and the standard cost of direct materials used in production, indicating how effectively a company is purchasing its raw materials.

Actual Costs

The actual expenses incurred in the production or acquisition of goods and services, as opposed to estimated or standard costs.