The Principal Difficulty with Normal Costing Is That

question 5

Multiple Choice

The principal difficulty with normal costing is that

• A)the unit cost information is not received on a timely basis.
• B)it can result in fluctuating per-unit overhead costs.
• C)estimated overhead and estimated activity are likely to differ from actual overhead and actual costs, resulting in underapplied or overapplied overhead.
• D)there is no difficulty associated with using normal costing.

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Definitions:

Sales Returns

Refers to goods that are returned by the customer to the seller after the sale, often due to defects or dissatisfaction.

Operating Expenses

The costs associated with running a business's day-to-day operations, excluding the cost of goods sold.

Periodic Inventory System

An accounting method that records inventory purchase or sale transactions at the end of an accounting period.

Gross Method

An accounting method for recording purchases at the gross invoice amount before deducting any cash discounts for early payment.