The Framework in Relation to Conservatism

question 14

Multiple Choice

The Framework in relation to conservatism:

• A)Explicitly states that conservatism is a bias to be avoided
• B)Requires that no profits be anticipated but all losses must be anticipated
• C)Is not explicit about the application of conservatism
• D)Because of conservatism requires a higher standard of evidence for the recognition of expenses than for revenue

Discuss the reasons for allocating indirect costs to responsibility centers.

Appreciate the importance of considering seasonal, cyclical, and trend factors in capacity estimation and overhead allocation.

Understand the process of allocating support department costs to production departments prior to product overhead allocation.

Understand the different types of costs in service organizations including upstream, downstream, and production costs.

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Definitions:

Regulation Z

A federal law that provides protection for consumers in credit transactions and is part of the Truth in Lending Act.

Truth-In-Lending Act

A federal law designed to promote informed use of consumer credit by requiring disclosures about terms and costs.

Retail Installment Sale

A transaction where the buyer pays for goods in regular installments while the seller retains ownership until the full price has been paid.

Food And Drugs

Pertains to the regulation and oversight of the production, distribution, and safety of food products and pharmaceuticals.