Because Managers Use Estimates in Calculating Overhead Allocation Rates, They

question 120

Multiple Choice

Because managers use estimates in calculating overhead allocation rates, they are likely to experience:

• A) Fixed overhead production volume variances
• B) No fixed or variable overhead variances
• C) Direct labour price variances
• D) Lower than expected profits

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Definitions:

Contingent Liability

A potential financial obligation that may arise depending on the outcome of a future event.

Likelihood

The probability or chance of an event occurring.

Contingency

An uncertain future event that could affect financial performance or outcomes.

Employee Earnings Record

A cumulative record of each employee’s gross earnings, deductions, and net pay during the year.