Under a Periodic Review System, Enough Inventory Must Be Carried

question 79

True/False

Under a periodic review system, enough inventory must be carried to protect against stockout for the replenishment lead time plus the review period.

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Definitions:

Variable Manufacturing Overhead

Manufacturing costs that vary in direct proportion to changes in production volume, such as utilities and indirect materials.

Machine-hours

A measure of production output based on the number of hours machines are operated within a given period.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the standard variable overhead assigned to the production based on the actual activity levels.

Total Variable Overhead Spending Variance

The overall difference between actual and budgeted variable overhead costs based on the changes in the level of activity.