When Can Product Costs Be Distorted If a Unit-Based Activity

question 36

Multiple Choice

When can product costs be distorted if a unit-based activity driver is used?

• A)when non-unit-based overhead costs are an insignificant proportion of total overhead
• B)when the consumption ratios differ between unit-based and non-unit-based input categories
• C)when the amount of overhead that each product consumes is insignificant
• D)when the degree of product diversity produced is small

Understand the effects of inventory changes on cash flow.

Grasp the impact of accounts payable and receivable changes on the statement of cash flows.

Comprehend the significance of amortization of discounts on bonds and investment, and its reflection on cash flows.

Recognize the implications of changes in liabilities and assets, such as salaries payable and prepaid expenses on cash flow.

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Definitions:

Average Tax Rate

The ratio of the total amount of taxes paid to the total income of the taxpayer, indicating the burden of taxation.

Federal Personal Income Tax

A tax levied by the federal government on individuals’ earnings, varying in rate based on income level.

Government Purchases

Expenditures made by the government for goods and services that directly satisfy the needs of the community or are used to provide public services.

Transfer Payments

These are payments made by the government to individuals, without the government receiving any goods or services in return, such as welfare or social security.