Explain What Is Covered by GAAP and Why It Is

question 101

Essay

Explain what is covered by GAAP and why it is important to use these standards.

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Definitions:

Standard Cost System

An accounting method that uses predetermined costs for product costing and decision-making purposes.

Standard Labor-Hours

The estimated amount of time that should be required to complete a task or produce a unit of goods.

Predetermined Overhead Rate

An estimated rate used to allocate overhead costs to products or job orders, based on expected costs and activity levels.

Variable Manufacturing Overhead

Costs that fluctuate with the level of production, such as utilities or indirect materials, but are still related to the manufacturing process.