Which of the Following Is True About What the Internal

question 51

Multiple Choice

Which of the following is true about what the Internal Revenue Service requires for calculating indirect manufacturing costs per unit?

• A) a method of which fairly apportions indirect production costs among the various items produced
• B) requires that theoretical capacity be used as a means of allocating indirect manufacturing costs
• C) requires the use of master-budget capacity utilization
• D) requires the use of normal capacity utilization

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Definitions:

Contribution Margin

The amount by which sales revenue exceeds variable costs; it contributes towards covering fixed costs and generating profit.

Variable Costs

Charges that adjust in relation to the quantity of goods or services manufactured by a corporation.

Fixed Costs

Expenses that do not change in response to the level of goods or services produced by the business, such as rent, salaries, and insurance.

Composite Unit

A measurement or quantity combining two or more units to represent a product or system's multiple aspects.