In Reporting the Effect of an Accounting Change on Comparative

question 116

Multiple Choice

In reporting the effect of an accounting change on comparative financial statements,recommended accounting procedure requires that the following be used for correcting an accounting error:

• A) Prospective application.
• B) Future application.
• C) Retrospective application.
• D) Retrospective, no restatement application.

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Definitions:

Material Price Variance

The difference between the actual cost of materials purchased and the expected (or standard) cost, indicating how efficiently materials are being purchased.

Material Usage Variance

The difference between the actual amount of materials used in production and the standard amount expected, valued at the standard cost.

Quality Of Materials

The measure of suitability of the materials used in production, affecting the durability and functionality of the final product.

Labour Rate Variance

The difference between the actual cost of direct labor and the estimated cost based on the standard labor rate.