One of the Primary Differences Between Overhead Costs in Non-Manufacturing

question 94

Multiple Choice

One of the primary differences between overhead costs in non-manufacturing settings and manufacturing settings is

• A) that non-manufacturing variable and fixed costs are inventoriable for financial reporting in non-manufacturing companies.
• B) GAAP requires different treatment of non-manufacturing costs for both manufacturing and non-manufacturing companies.
• C) only non-manufacturing companies must include overhead costs as inventoriable costs for financial reporting.
• D) overhead is typically negligible in a non-manufacturing setting.
• E) only manufacturing companies are required to include overhead costs in their inventoriable costs for financial reporting.

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Definitions:

High-Low Method

A technique used in cost accounting to estimate variable and fixed costs based on the highest and lowest levels of activity.

Break-Even Point

The point at which total costs equal total revenues, indicating that a business is neither making a profit nor incurring a loss.

Contribution Margin Ratio

The contribution margin ratio is a financial metric indicating the proportion of sales revenue that exceeds variable costs and is available to cover fixed costs and generate profit.

Fixed Costs

Outlays for rent, salaries, and insurance that are unaffected by variations in the volume of production or sales.