A company should use the same denominator level capacity for all the budgets and other purposes so as to facilitate comparability and avoid misrepresentation.

Question

Quizplus · Accepted Answer

A company is not required to use the same capacity-level concept for different purposes. It can use different denominator level capacity, say, for management planning and control, external reporting to shareholders, and income tax purposes.

A Company Should Use the Same Denominator Level Capacity for All