Laramie, Inc

question 4

Multiple Choice

Laramie, Inc., has an operating environment with considerable uncertainty. The company prepares the budget for several different volume levels. Laramie had the following budgeted data:
What is the difference in total budgeted costs between the volume range of 4,000 and 5,000 units?

• A) $-0-
• B) $18,550
• C) $1,000
• D) $9,000

Understand the theory and rationale behind the LCM rule, including conservatism.

Apply the gross profit method to estimate inventory cost.

Recognize specific accounting treatments for loss on non-cancellable purchase contracts.

Understand and apply the concept of the lower of cost or market rule in inventory valuation.

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Definitions:

Quenching

A heat treatment process used to harden or soften metal by heating it and then rapidly cooling it.

Assembly Line

A manufacturing process in which parts are added to a product in a sequential manner to create a finished product more efficiently.

Dispatch

The sending off of a message, parcel, or shipment with speed and efficiency.

Diminishing Marginal Returns

A principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, starts to decrease.