A Company Decided to Reduce Its Inventory by Lowering Their

question 67

Multiple Choice

A company decided to reduce its inventory by lowering their prices. The plan to get rid of excessive inventory was so successful that the company found itself completely sold out in just a couple of days. In other words, The company experienced____________ .

• A) a loss of amortization
• B) negative sales
• C) a stockout
• D) aggregated turnover
• E) negative turnover

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Definitions:

Standard Cost System

An accounting method that uses cost estimates for materials, labor, and overhead to control business costs.

Variable Overhead Spending Variance

The difference between the actual variable overhead incurred and the expected (or standard) variable overhead based on the actual level of production activity.

Standard Variable Overhead Rate

The predetermined rate used to allocate variable manufacturing overhead to individual units of production.