A Business Uses the Calendar Year for Its Fiscal Year

question 26

True/False

A business uses the calendar year for its fiscal year. On March 10th, it buys six months of liability insurance that will go into effect on April 1st. This should be listed in the books as a prepaid expense.

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Definitions:

Indirect Manufacturing Cost

Costs related to production that are not directly tied to a specific product, such as maintenance, supervision, and utilities.

Incremental Manufacturing Cost

The additional cost incurred for the manufacturing of one more unit of a product.

Relevant Range

The range of activity within which the assumptions about variable and fixed costs remain valid, used in cost accounting and financial planning.

Product Costs

The costs incurred by a business to manufacture a product, including direct materials, direct labor, and manufacturing overhead.