Changes in Accounting Principle Are Allowed Where

question 70

Multiple Choice

Changes in accounting principle are allowed where

• A) they are required by a primary source of GAAP.
• B) they result in reliable and more relevant information.
• C) the company reports less favourable results under the new policy.
• D) both a and b are correct.

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Definitions:

Actual Direct Materials

The actual amount of raw materials used in the production process.

Standard Price

A set cost figure used to value inventory or measure cost performance, often compared to actual prices to calculate variances.

Material Price Variance

The difference between the actual cost of materials purchased for production and the standard cost, indicating how much more or less was spent than expected.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels of the business.