A Company That Sells Merchandise to Customers Should Normally Recognize

question 79

Multiple Choice

A company that sells merchandise to customers should normally recognize

• A)revenue only after the cash is collected.
• B)revenue and the related expenses in the period the revenue earned, whether payment is received or not.
• C)both Revenue and expenses in the period following sale.
• D)expenses in the period the merchandise is sold and revenue in the following period.

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Definitions:

Unfavorable Direct Materials Price Variance

A financial metric indicating that the actual cost of direct materials was higher than the planned or standard cost, leading to a decrease in profitability.

Standard Price

Standard price is a pre-determined cost assigned to materials, labor, and overheads to measure variances in budgeting and accounting.

Direct Materials

Raw materials directly used in the production of goods, easily traceable to the final product.

Theoretical Standard

A benchmark for the most efficient level of operating performance or cost control, assuming perfect conditions.