Many Firms Feel a Strong Obligation to Establish and Use

Multiple Choice

Many firms feel a strong obligation to establish and use a standard rate for fixed factory overhead because:

A) Generally accepted accounting principles in the U.S. require full costing of inventories for financial reporting purposes.
B) The resulting data are useful for performance-evaluation purposes.
C) Larger income tax deductions result when fixed overhead costs are treated as product costs rather than period costs.
D) This approach improves upon management's ability to more accurately forecast future overhead costs.
E) None of the above—fixed overhead costs are typically expensed as period costs.