Which One of the Following Characteristics Is Associated with Standard

question 166

Multiple Choice

Which one of the following characteristics is associated with standard cost variance analysis for manufacturing overhead under a traditional versus an activity-based cost (ABC) system?

• A) The total manufacturing overhead variance will be the same under either system.
• B) The traditional cost system does not meet the current International Financial Reporting Standards for internal control and product costing.
• C) The traditional system, but not the ABC system, is acceptable for income tax purposes.
• D) Cost variances under an ABC system must be closed to cost of goods sold (CGS), while those calculated under a traditional system can also be prorated (allocated) to CGS and inventory accounts.
• E) Under both cost systems a flexible budget (FB) is used for control purposes.

---

Definitions:

Gross Profit

The financial gain obtained after subtracting the cost of goods sold from the revenue earned from sales.

Sales Expense

Costs directly associated with the selling of goods or services, typically including advertising, sales staff salaries, and commissions.

Net Sales

The amount of revenue a company generates from its operations after deducting returns, allowances for damaged or missing goods, and discounts.

Gross Profit

The financial gain obtained after subtracting the cost of goods sold from total revenue, indicating the efficiency of a company in managing its production and labor costs.