Which of the Following Statement Is True Regarding Choice of the Denominator

question 149

Multiple Choice

Which of the following statement is true regarding choice of the denominator volume level in conjunction with the process of allocating fixed manufacturing costs to production?

• A) The choice typically will affect end-of-period asset values, but not the production-volume variance for the period.
• B) The choice is important only if the company in question uses variable costing.
• C) Under absorption (full) costing, this choice can affect reported profits for the period.
• D) This choice has no effect on the standard overhead cost-allocation rate.
• E) The choice affects the standard overhead cost-allocation rate but not product cost.

---

Definitions:

Sustainable Output

The level of production that can be maintained over the long term without depleting natural resources or harming the environment.

Unemployment Rate

The fraction of the employment sector that is not employed and is earnestly looking for work.

Nominal Wage

The wage paid to employees in current currency terms, without adjustment for inflation, representing the face value of earnings.

Real Wage

The purchasing power of wages, adjusted for inflation, reflecting the actual goods and services that can be bought.