Multiple Choice
In the context of net sales, buying a cheaper product sometimes can help you _____.
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4. Merchandising Operations
Net Sales
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
In financial accounting, the difference between overhead applied to Work in Process and actual overhead incurred is known as:
A
Net sales
B
Cost of goods sold
C
Overhead variance
D
Gross profit
Verified step by step guidance1
Understand the concept of overhead in financial accounting: Overhead refers to indirect costs incurred during production, such as utilities, rent, and salaries of supervisors, which cannot be directly traced to a specific product.
Learn about overhead application: Overhead is applied to Work in Process (WIP) using a predetermined overhead rate, which is based on estimated costs and activity levels (e.g., labor hours or machine hours).
Recognize the difference between applied and actual overhead: Applied overhead is the estimated amount allocated to WIP, while actual overhead is the real cost incurred during production.
Define overhead variance: Overhead variance is the difference between the applied overhead and the actual overhead incurred. It can be favorable (applied overhead exceeds actual overhead) or unfavorable (actual overhead exceeds applied overhead).
Relate the concept to the problem: The correct term for the difference between overhead applied to WIP and actual overhead incurred is 'Overhead variance,' as it represents the discrepancy between estimated and actual costs.
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