Interest Incurred During the Development and Manufacture of a Machine

question 55

True/False

Interest incurred during the development and manufacture of a machine must be capitalized.

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Definitions:

Applied

The method of assigning or allocating overhead costs to specific products or jobs based on a predetermined rate.

Fixed Manufacturing Overhead

Costs incurred during the production process that do not vary with the level of production, such as rent for factory buildings, salaries of plant managers, and depreciation of manufacturing equipment.

Budget Variance

The variance between what was expected to be spent or earned, according to the budget, and the real amount that was spent or received.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to individual products or job orders, based on a specific activity base, such as labor hours or machine hours.