Hamell Corporation Is Making a Presentation to a Perspective Investor

question 7

Multiple Choice

Hamell Corporation is making a presentation to a perspective investor.The presentation includes a projection showing that the company's sales will be between $25,000,000 and $27,000,000 within the next three years.Hamell believes the information will be better received if its CPA provides an attestation report on the projection.The CPA should insure that proper disclosure is made to indicate that

• A)the $27,000,000 estimate is a best case scenario.
• B)the range of the projection is appropriate given the circumstances.
• C)the range does not indicate a "best" and "worst" case scenario.
• D)projections are limited in their information content due to uncontrollable changes in the business environment.

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Definitions:

Variable Overhead

Costs that fluctuate with the level of production output, such as utilities or materials, unlike fixed overhead costs.

Total Overhead Variance

The difference between the actual overhead costs incurred and the overhead costs that were applied or allocated based on standard costing procedures.

Materials Quantity Variance

The difference between the actual quantity of materials used in production and the quantity that should have been used, valued at the standard cost.

Direct Material

The raw materials that are directly traceable to the manufacturing of a product and constitute a significant portion of the production cost.