Charging the Cost of a Wastebasket with an Estimated Useful

question 99

Multiple Choice

Charging the cost of a wastebasket with an estimated useful life of 10 years to an expense account when purchased is an example of the application of

• A) the historical cost principle.
• B) the matching principle.
• C) the materiality constraint.
• D) the full disclosure principle.

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Definitions:

Underapplied

A situation where the actual manufacturing overhead costs are more than what was allocated to products.

Predetermined Overhead Rate

A calculated rate that estimates the manufacturing overhead cost per unit of production, based on expected or historical data.

Machine-Hours

A measure of the amount of time a machine is operated during a given period, commonly used in manufacturing to allocate costs or to measure productivity.

Manufacturing Overhead Costs

All indirect costs associated with the manufacturing process, including utilities, rent, and salaries for non-direct labor.