According to IAS 36 the Recoverable Amount of an Asset

question 21

Multiple Choice

According to IAS 36 the recoverable amount of an asset or cash-generating unit is the:

• A)lower of its fair value less costs of disposal and its value in use.
• B)lower of its fair value plus costs of disposal and its value in use.
• C)higher of its fair value less costs of disposal and its value in use.
• D)higher of its fair value plus costs of disposal and its value in use.

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Definitions:

Fixed Manufacturing Overhead

Costs that do not vary with the level of production, such as rent, salaries of permanent staff, and property taxes on a factory.

Variable Costing

A method of accounting that incorporates only the costs that vary with production into the cost of products, leaving out any fixed manufacturing overhead.

Absorption Costing

A fiscal recording method that consolidates every cost involved in manufacturing, which includes the price of direct materials, payments for direct labor, and total overhead costs, whether stable or fluctuating, into the cost allocated to a product.

Variable Costing

A costing method that incluonly direct materials, direct labor, and variable manufacturing overhead in product costs, excluding fixed manufacturing overhead.