Which of the Following Statements Does NOT Describe a Benefit

question 57

Multiple Choice

Which of the following statements does NOT describe a benefit of markdowns for a retailer?

• A) Markdowns generate cash flow to pay for new merchandise.
• B) It is a way to make room for new merchandise.
• C) It rids the store of obsolete merchandise.
• D) It increases customer traffic.
• E) It is a way to gain a higher gross margin.

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Definitions:

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate estimated overhead costs to products based on a predetermined activity base.

Machine-Hours

A measure of the amount of time machines are operated in the production of goods or services, used as a basis for allocating manufacturing costs.

Manufacturing Overhead

The indirect costs related to manufacturing, not including direct labor or materials, such as utility costs and maintenance expenses.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to individual products or job orders, based on a predetermined formula.