In Order to Capitalize Interest Under GAAP There Are Three

question 78

Essay

In order to capitalize interest under GAAP there are three issues that must be addressed prior to implementation, what are these three issues?

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Definitions:

Labour Rate Variance

The difference between the actual cost of labor and its expected cost based on standards set for production.

Labour Efficiency Variance

The difference between the actual labor hours used in production and the standard hours expected, multiplied by the standard labor rate.

Standard Costing

A cost accounting method that uses standard costs—the expected costs of labor, material, and overhead—to compare against actual costs.

Variable Overhead

encompasses the costs of production that vary with the level of output, such as utilities and materials, as opposed to fixed overheads.