Many Firms Feel a Strong Obligation to Establish and Use

question 37

Multiple Choice

Many firms feel a strong obligation to establish and use a standard rate for fixed factory overhead because:

• A) Generally accepted accounting principles in the U.S. require full costing of inventories for financial reporting purposes.
• B) The resulting data are useful for performance-evaluation purposes.
• C) Larger income tax deductions result when fixed overhead costs are treated as product costs rather than period costs.
• D) This approach improves upon management's ability to more accurately forecast future overhead costs.
• E) None of the above—fixed overhead costs are typically expensed as period costs.

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Definitions:

Traditional View

A perspective or belief that adheres to long-established practices or interpretations.

Syllogism Validity

The measure of whether a deductive argument is logically sound, where the conclusion necessarily follows from the premises.

Traditional View

The traditional view often refers to the long-established or conventional perspective on a subject.

Existential Import

the implication that something exists, commonly discussed in the context of categorical statements or propositions in logic.