One Important Use of Inventories in Manufacturing Is to Decouple

question 21

True/False

One important use of inventories in manufacturing is to decouple operations through the use of work-in-process inventories.

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Definitions:

Fixed Overhead Budget

A financial plan that forecasts the fixed overhead costs a company expects to incur, regardless of its level of output.

Fixed Overhead Volume

A measurement of the costs that remain constant regardless of the company's level of production or business activity.

Overapplied

In cost accounting, this refers to a situation where the allocated overhead costs exceed the actual overhead costs incurred.

Variable Overhead Rate

The per-unit cost of overhead that changes with the level of production or activity.