9 1 identify the factors important to choosing the denominator level used to calcula 4302499
9.1 Identify the factors important to choosing the denominator level used to calculate fixed overhead allocation rates.
1) Using either the theoretical capacity or practical capacity as the denominator-level concept will result in the same production-volume variance.
2) Determining the “right” level of capacity is one of the most strategic and difficult decisions managers face.
3) Both theoretical and practical capacity measure capacity in terms of demand for the output.
4) Normal capacity utilization is the expected level of capacity utilization for the current budget period, which is typically one year.
5) Normal capacity utilization is not the same as master-budget capacity utilization.
6) ________ is the level of capacity based on producing at full efficiency all the time.
A) Practical capacity
B) Theoretical capacity
C) Normal capacity
D) Demand capacity
E) Master-budget capacity
7) Theoretical capacity is based on which of the following assumptions?
A) that absorption costing is used
B) that variable costing is used
C) production will occur at peak efficiency all the time
D) production will occur at peak capacity where feasible (e.g., except for maintenance downtime)
E) production can never occur at peak capacity
8) Practical capacity is based on which of the following assumptions?
A) that absorption costing is used
B) that variable costing is used
C) Production will occur at peak efficiency all the time.
D) Production will occur at peak capacity where feasible (e.g., except for maintenance downtime, repairs, holidays, etc.).
E) Production can never occur at peak capacity.
9) The denominator-level concept based on capacity utilization that satisfies average customer demand that includes seasonal and cyclical factors is called
A) theoretical capacity.
B) practical capacity.
C) normal capacity.
D) master-budget capacity.
E) supply capacity.
10) The denominator-level concept based on capacity utilization for the anticipated level of output that will satisfy customer demand for a single operating cycle, and complies with the Canada Revenue Agency for tax purposes, is the
A) theoretical budget capacity.
B) practical budget capacity.
C) normal capacity.
D) master-budget capacity.
E) supply capacity.