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:

Future Earnings

The projected income a company or individual is expected to generate over a future period.

Intangible Assets

Assets that lack physical substance but have value, such as intellectual property, brand reputation, and copyrights.

Goodwill

An intangible asset representing the value of a company's brand, customer relationships, and other non-physical assets.

Recovered

Refers to the process of regaining or securing an amount of money, property, or other resource that was previously lost or owed.