The Central Assumptions of Economics That Form a Basis for Positive

question 60

Multiple Choice

The central assumptions of economics that form a basis for Positive Accounting Theory are that:

• A) all individual action is driven by self-interest and individuals will act in an opportunistic manner.
• B) all individuals are entrepreneurial and will act in an opportunistic manner.
• C) individuals cooperate in groups to form markets for the benefit of everyone.
• D) there is a moral code that guides the behaviour of individuals to operate efficient markets.

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Definitions:

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected overhead based on standard rates.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead incurred and the standard cost allotted for the actual production achieved, indicating the efficiency of utilizing variable resources.

Materials Quantity Variance

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

Favorable

A term used in variance analysis indicating that actual costs were lower than budgeted or standard costs, leading to higher profits.