When Product Costs Are Used for Decision-Making,what Assumption Is Most

question 52

Multiple Choice

When product costs are used for decision-making,what assumption is most likely to distort the decisions?

• A) There is a proportionality of overhead costs and output,regardless of whether a product is dropped or not.
• B) Some overhead estimates can decrease when a product is dropped.
• C) Some overhead costs could be fixed when a product is dropped.
• D) The cost accounting system treats all overhead as if it were variable with respect to the allocation base.

Identify and eliminate unrealized profits or losses in intercompany transactions.

Distinguish between different methods of accounting for investments (cost and equity method).

Recognize and measure goodwill and its impairment in a business combination.

Prepare and understand a condensed consolidated statement of financial position.

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Definitions:

Economic Decision Makers

Individuals or entities that make choices regarding the allocation of resources, investment, and production within an economy.

Economics

The social science concerned with the production, distribution, and consumption of goods and services.

Price Received

The amount of money a seller gets after the sale of a product or service, accounting for discounts, taxes, and additional charges.

Resources Used

The total inputs, including raw materials, labor, and capital, that are consumed in the production of goods and services.