When a Buyer Pays a Lower Price for Buying in Multiple

question 91

Multiple Choice

When a buyer pays a lower price for buying in multiple units or above a specified dollar amount,the buyer is receiving a:

• A) functional discount
• B) cash discount
• C) rebate
• D) promotional allowance
• E) quantity discount

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Definitions:

Predetermined Overhead Rate

A rate calculated at the beginning of the fiscal period to estimate indirect costs based on a certain activity, such as machine hours or labor hours.

Direct Labor-Hours

The cumulative amount of time spent working directly in the production of a good or the delivery of a service.

Job-Order Costing

A cost accounting system that accumulates costs per job rather than process, suitable for firms producing unique or custom products.

Predetermined Overhead Rate

A rate used to apply manufacturing overhead to products, calculated before the manufacturing process begins.