The Effect of Uniform Production Levels on Unit Production Costs

question 30

Multiple Choice

The effect of uniform production levels on unit production costs can be achieved

• A) by using a factory overhead rate based on different production levels for each year.
• B) by using a factory overhead rate based on selling price.
• C) by closing the factory overhead at the end of the accounting period.
• D) by using a factory overhead rate based on long-run normal production activity level.

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Definitions:

Cash

Liquid currency and resources such as bank deposits that a business has immediate access to for transactions and operations.

Prepaid Insurance

Prepaid insurance is the portion of insurance premiums that has been paid in advance for coverage over future periods, and is classified as a current asset on the balance sheet.

Unearned Revenue

Money received by a business for services or products yet to be delivered or provided; considered a liability until the service or product is delivered.

Utilities Expense

The cost incurred by a business for the consumption of utilities services like electricity, gas, water, and sewage.