A General Description of the Depreciation Methods Applicable to Major

question 96

Multiple Choice

A general description of the depreciation methods applicable to major classes of depreciable assets

• A) is not a current practice in financial reporting.
• B) is not essential to a fair presentation of financial position.
• C) is needed in financial reporting when company policy differs from income tax policy.
• D) should be included in corporate financial statements or notes thereto.

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Definitions:

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products or job orders, calculated based on estimated overhead costs and an allocation base such as direct labor hours.

Machine-Hours

An indicator reflecting the duration of machinery utilization during the manufacturing process, commonly employed in the distribution of manufacturing overhead expenses.

Manufacturing Overhead

Represents indirect costs involved in producing goods, including maintenance expenses, quality control, and equipment depreciation.

Variable Manufacturing Overhead

The portion of manufacturing overhead costs that vary directly with production volume, such as supplies and indirect labor.