One of the Ways That Functional-Based Accounting Systems May Inadvertently

question 8

Multiple Choice

One of the ways that functional-based accounting systems may inadvertently induce managers to act against the company's best interest is to

• A) pass along defective parts to avoid an unfavorable materials usage variance
• B) produce less units than demanded to avoid a labour efficiency variance
• C) acquire materials in large quantities to avoid a favorable materials price variance
• D) use more experienced workers to avoid a labour rate variance

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Definitions:

Inventory Management

The practice of ordering, storing, tracking, and controlling inventory to ensure the availability of products while minimizing costs and storage space.

Stock-Out

A situation where inventory is exhausted and unavailable for sale or use, often leading to lost sales or production delays.

Collection Period

The average number of days it takes a company to collect payments owed by its customers for sales made on credit.

Credit Sales

Transactions where goods or services are provided to a customer with the agreement that payment will be made at a future date.