chapter 7

Question 1

variable costing

Answer 1

method of stock costing in which all variable manufacturing costs are included as inventoriable costs. all fixed manufacturing costs are excluded; they are costs of the period in which they are incurred.

Question 2

absorption costing

Answer 2

method of stock costing in which all variable manufacturing costs and all fixed manufacturing costs are included as inventoriable costs.

Question 3

capacity

Answer 3

constraint, an upper limit.

Question 4

theoretical capacity

Answer 4

the denominator-level concept that is based on the production of output at full efficiency for all of the time.

Question 5

practical capacity

Answer 5

the denominator-level concept that reduces the theoretical capacity for unavoidable operating interruptions.

Question 6

normal utilisation

Answer 6

the denominator-level concept based on the level of capacity utilisation that satisfies average customer demand over a period that includes cyclical, or other trend factors.

Question 7

master-budget utilisation

Answer 7

the denominator-level concept based on the anticipated level of capacity utilisation for the next budget period.