The Primary Purpose of Calculating Standard Cost Variances Each Period

question 171

Multiple Choice

The primary purpose of calculating standard cost variances each period is:

• A) To achieve financial control regarding operating activities.
• B) To facilitate the recording of manufacturing costs during a period.
• C) To adjust reported income to flexible-budget income.
• D) To diagnose the cause of operating problems as well as what should be done to correct such problems.
• E) To minimize income tax liabilities.

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Definitions:

Consumer Surplus

The discrepancy between consumer willingness to pay a total amount for a product or service and the amount they really do pay.

Consumer Surplus

The difference in the total amount consumers are predisposed and financially prepared to pay for a good or service versus their actual expenses.

Normal Good

A good for which demand increases as consumer income rises, and decreases when consumer income falls, all other factors being constant.

Decrease in Income

A reduction in the amount of money received by an individual or entity, which can affect consumption and saving behaviors.