Volume Variances Are Calculated for Which of the Following Reasons

question 61

Multiple Choice

Volume variances are calculated for which of the following reasons?
I. GAAP requires that actual costs be recorded in the income statement and balance sheet
II. Estimates are used for allocation rates so that costs can be allocated when actual costs are not yet known
III. Only CRA requires volume variances in the calculation of income taxes

• A)I only
• B)II only
• C)I and II only
• D)I, II, and III

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Definitions:

Normal Good

A good for which demand increases when consumer income rises, and falls when consumer income decreases, all other factors being constant.

Demand Curve

A graphical representation that shows the relationship between the price of a good and the quantity demanded by consumers.

Equilibrium Price

The price in the market where the amount of a product that consumers want to buy is the same as the amount available for sale, resulting in a balanced market situation.

Demand Schedules

Tabular representations showing the quantity of a good or service that consumers are willing and able to buy at various prices, over a specified period.