The Most Widely Used Approach to Disposing of Overhead Variances

question 31

Multiple Choice

The most widely used approach to disposing of overhead variances is

• A) proration.
• B) to allocate between cost of goods sold and finished goods inventory.
• C) immediate write-off.
• D) to capitalize as a cost of finished goods inventory.

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Definitions:

Contribution Margin

The amount by which sales revenue exceeds variable costs, used in breakeven analysis and to assess operational efficiency.

Profit Center Manager

An individual responsible for a division or unit within an organization, focusing on generating profit and controlling costs.

Performance Measure

Indicators used to evaluate and assess the effectiveness, efficiency, and success of an organization's activities or employee's performance.

Controllable Margin

A metric used in management accounting, representing the difference between sales revenue and controllable costs.