When Machine-Hours Are Used as a Cost-Allocation Base, the Item

question 37

Multiple Choice

When machine-hours are used as a cost-allocation base, the item most likely to contribute to a favorable production-volume variance is:

• A)an increase in the selling price of the product
• B)the purchase of a new manufacturing machine costing considerably less than expected
• C)a decline in the cost of energy
• D)strengthened demand for the product

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Definitions:

Value-Relevance

The usefulness of financial information in affecting investors' decisions, including how changes in financial statement measures (like earnings and book values) impact stock market values.

Quality

The degree of excellence of a product, service, or process, often measured against standards or customer expectations.

Sustainable

The ability of something to be maintained at a certain rate or level without depleting natural resources or causing severe ecological damage.

Earnings Quality

A measure of the reliability of a company’s earnings as an indicator of its financial health and performance.