Question

Will the financial statements of a company always differ when different choices at the start of the accounting period are made regarding the​ denominator-level capacity​ concept?

A. No. It depends on how a company handles the​ production-volume variance in the​ end-of-period financial statements. For​ example, if the adjusted​ allocation-rate approach is​ used, each​ denominator-level capacity concept will give the same financial statement numbers at​ year-end.
B. Yes. If different choices at the start of the accounting period are made regarding the​ denominator-level capacity​ concept, this will always result in different financial statement numbers at​ year-end.
C. Yes. The four different​ capacity-level concepts result in four different budgeted fixed manufacturing overhead cost rates per​ unit, which in turn leads to different results being reported on the financial statements.
D. No. It depends on how a company handles the​ production-volume variance in the​ end-of-period financial statements. For​ example, if the​ write-off approach is​ used, each​ denominator-level capacity concept will give the same financial statement numbers at​ year-end. Click to select your answer.

Answer 1

Will the financial statements of a company always differ when different choices at the start of the accounting period are made regarding the​ denominator-level capacity​ concept?

A. No. It depends on how a company handles the​ production-volume variance in the​ end-of-period financial statements. For​ example, if the adjusted​ allocation-rate approach is​ used, each​ denominator-level capacity concept will give the same financial statement numbers at​ year-end.

Step-by-step explanation:

Level capacity strategy

The organisation manufactures or produces at a constant rate of output ignoring any changes or fluctuations in customer demand levels. This often means stockpiling or higher holdings of inventory when customer demand levels fall