The Best Cost Estimate for Resources Required to Handle Production

question 83

Multiple Choice

The best cost estimate for resources required to handle production runs is developed by using ________ as the denominator for activity cost driver calculations.

• A)actual driver quantities of actual production runs
• B)estimated driver quantities of estimated production runs
• C)available capacity
• D)practical capacity

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Definitions:

Net Income

The total amount of profit left over after all operating expenses, taxes, and interest have been deducted from total revenue.

Variable Costs

Costs that change in proportion to the level of activity or volume of goods produced, including materials, labor, and energy costs.

Fixed Costs

Expenses that do not change with the volume of production or sales, such as rent and salaries.

Net Income

The amount of profit remaining after all operating expenses, taxes, and interest have been deducted from total revenue.