Which of the Following Statements Best Describes Considerations Regarding a Company's

question 58

Multiple Choice

Which of the following statements best describes considerations regarding a company's tax expense that users of GAAP financial statements may make?

• A) The breakdown of tax expense between current and deferred may provide useful information regarding the comparison of tax burdens between companies.
• B) An analysis of earnings before interest, taxes, depreciation, and amortization EBITDA) is often a better approach to comparing the operating results of two companies.
• C) One-time effects within a company's effective tax rate should be removed before comparing the effective tax rates across companies or across years for the same company).
• D) All these observations are correct.

---

Definitions:

Fixed Factory Overhead Volume Variance

A measure used in cost accounting to determine the difference between the budgeted and actual volume of production, affecting the allocation of fixed overhead costs.

Standard Direct Materials

The predetermined cost and quantity of raw materials expected to be used in the production process, used for budgeting and performance evaluation.

Fixed Factory Overhead Volume Variance

The difference between the budgeted and actual fixed overhead costs, due to variations in production levels.

Variable Factory Overhead Controllable Variance

The difference between the actual variable overhead costs incurred and the expected costs based on the standards set for the production volume.