Which of the Following Statement Is True Regarding Choice of the Denominator

question 149

Multiple Choice

Which of the following statement is true regarding choice of the denominator volume level in conjunction with the process of allocating fixed manufacturing costs to production?

• A) The choice typically will affect end-of-period asset values, but not the production-volume variance for the period.
• B) The choice is important only if the company in question uses variable costing.
• C) Under absorption (full) costing, this choice can affect reported profits for the period.
• D) This choice has no effect on the standard overhead cost-allocation rate.
• E) The choice affects the standard overhead cost-allocation rate but not product cost.

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Definitions:

Financial Statements

Structured reports that detail the financial performance of an organization, typically including the balance sheet, income statement, and cash flow statement.

Depreciation Expenses

The allocation of the cost of tangible assets over their useful lives, recognized as an expense on the income statement.

Retained Earnings

Profits that a company chooses not to distribute as dividends to shareholders but instead reinvests in the business or keeps as reserve.

Depreciation

A technique for distributing the expense of a physical asset across its lifespan.