A Company May Set Predetermined Overhead Rates Based on Normal,expected

question 182

Multiple Choice

A company may set predetermined overhead rates based on normal,expected annual,or theoretical capacity.At the end of a period,the fixed overhead spending variance would

• A)be the same regardless of the capacity level selected.
• B)be the largest if theoretical capacity had been selected.
• C)be the smallest if theoretical capacity had been selected.
• D)not occur if actual capacity were the same as the capacity level selecteD.

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Definitions:

Merchandise Inventory

The total cost of all goods that are available for sale during a certain period, including purchases and adjustments for returns or damages.

Inventory On Hand

Refers to the total amount of items or products available in stock by a business at any given time.

Debit Memo

A document issued by a buyer to a seller indicating a reduction of the amount due to the seller, often due to returned goods or discrepancy in billing.

Price Allowance

A reduction in the selling price, often used as a promotional strategy or to compensate for minor defects.