In a Period of Rising Sales, Utilizing Past Cost and Expense

question 1

Multiple Choice

In a period of rising sales, utilizing past cost and expense ratios (percent-of-sales method) when preparing pro forma financial statements will tend to ________.

• A) overstate costs and overstate profits
• B) overstate costs and understate profits
• C) understate costs and overstate profits
• D) understate costs and understate profits

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Definitions:

Participation

involves the act of taking part in an activity or contributing to a group effort in a collaborative or decision-making process.

Employee Resistance

Opposition or pushback by workers against changes or policies introduced by management.

Socialization

The process by which individuals learn and adopt the norms, values, and behaviors appropriate to their society or organizational culture.

Ethnocentrism

Ethnocentrism is the belief in the inherent superiority of one's own ethnic group or culture over others.