A Restrictive Short-Term Financial Policy Tends To

question 48

Multiple Choice

A restrictive short-term financial policy tends to:

• A)grant credit to more customers.
• B)reduce future sales more so than a flexible policy.
• C)encourage credit sales over cash sales.
• D)incur more carrying costs than a flexible policy does.
• E)reduce order costs as compared to a more flexible policy.

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Definitions:

Fixed Costs

Regularly occurring costs that remain constant in total, irrespective of changes in operational levels or volume of output.

Variable Costs

Costs that change in direct proportion with the level of output or activity of a business.

Underapplied Overhead

occurs when the allocated manufacturing overhead cost is less than the actual overhead incurred, leading to a discrepancy.

Overapplied Overhead

A situation where the allocated manufacturing overhead costs exceed the actual overhead costs incurred.