Which of the Following Is Not True Regarding Depreciation

question 30

Multiple Choice

Which of the following is not true regarding depreciation?

• A) depreciation allocates the cost of a fixed asset over its estimated life.
• B) depreciation expense reflects the decrease in market value each year.
• C) depreciation is an allocation not a valuation method.
• D) depreciation expense does not measure changes in market value.

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Definitions:

Variable Costing

An accounting method where only variable costs (costs that change with production levels) are included in product costs, excluding fixed costs.

Net Operating Income

The total profit of a business after operating expenses have been deducted, but before taxes and interest.

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in the cost of goods sold, excluding fixed manufacturing overhead.

Contribution Margin

The gap between sales income and variable expenses, showing the extent to which income aids in offsetting fixed expenses and creating earnings.