The Difference Between the Actual Manufacturing Overhead and the Manufacturing

question 7

Multiple Choice

The difference between the actual manufacturing overhead and the manufacturing overhead applied to production is the

• A) sum of spending, efficiency, budget and volume variances.
• B) efficiency variance.
• C) spending variance.
• D) volume variance.

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Definitions:

Expense Recognition Principle

An accounting principle that states expenses should be recognized and recorded when they contribute to generating revenue, regardless of when cash is paid.

Allowance for Doubtful Accounts

An accounting entry known as a contra-asset account that predicts the amount of accounts receivable that might be uncollectible.

Realizable Value

The estimated amount for which an asset can be sold, minus any selling costs, at a given point in time.

Materiality Constraint

An accounting principle that allows for the ignoring of accounting information that would not impact users’ decision-making due to its insignificance.