The Allocation of the Costs of Natural Resources, Such as Minerals

question 24

Multiple Choice

The allocation of the costs of natural resources, such as minerals, to expense as the resource is extracted is referred to as:

• A)depreciation.
• B)amortization.
• C)depletion
• D)salvage value.

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Definitions:

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate indirect costs to products or services based on a chosen activity base such as labor hours or machine hours.

Estimated Annual Overhead Costs

Predicted yearly expenses that are not directly tied to specific products or services but are necessary for running a business.

Expected Annual Operating Activity

The forecasted level of operations for a company during a financial year, including production and sales volumes.

Process Costing

An accounting methodology used to allocate production costs to individual units of output when products are virtually indistinguishable from each other.