Which of the Following Statements Is Correct

question 18

Multiple Choice

Which of the following statements is correct?

• A) In a period of rising prices, cost of sales is overstated
• B) In a period of rising prices, return on capital employed (ROCE) is understated
• C) In a period of rising prices, asset values are understated
• D) In a period of rising prices, depreciation is overstated

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Definitions:

Direct Labor

The labor costs of workers who are directly involved in the production of goods or the rendering of services.

Direct Labor Hour

A measure of the amount of time workers spend directly manufacturing a product.

Direct Materials

Raw materials that can be directly traced to the production of specific goods or services and are significant in cost.

Total Cost

The complete amount of costs involved in producing, purchasing, and/or selling goods or services, including fixed and variable costs.