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.

---

Definitions:

Neuron

A distinct cell type responsible for conveying nerve signals; it forms the fundamental unit of the nervous system.

Action Potential

A short-lasting event in which the electrical membrane potential of a cell rapidly rises and falls, allowing neurons to transmit signals.

Neural Impulse

An electrical signal that travels along a neuron, enabling communication between neurons and between neurons and muscles.

Resting Potential

The electrical charge of a neuron when it is not actively firing, establishing a state of potential energy that enables neural communication.