By-Product Costing That Uses the Asset Recognition Method(s) Creates

question 54

Multiple Choice

By-product costing that uses the asset recognition method(s) creates:

• A)Expense recognition in the current period.
• B)A distortion of net income.
• C)An adjustment on the income statement.
• D)An inventory value in the period in which the by-products are produced.
• E)A result that is not compatible with GAAP.

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Definitions:

EOQ Model

Economic Order Quantity model; an inventory management method used to determine the optimum order quantity that minimizes the total inventory holding costs and ordering costs.

Shortage Costs

Costs that fall with increases in the level of investment in current assets.

Carrying Costs

Expenses incurred for holding inventory, including storage, insurance, and handling costs.

Bond Yields

The amount of return an investor realizes on a bond, calculated by dividing annual interest payments by the bond's current market price.