A Rational and Systematic Allocation Base for Service Department Costs

question 118

Multiple Choice

A rational and systematic allocation base for service department costs should reflect the cost accountant's consideration of all of the following except

• A)the ability of revenue-producing departments to bear the allocated costs.
• B)the benefits received by the revenue-producing department from the service department.
• C)a causal relationship between factors in the revenue-producing department and costs incurred in the service department.
• D)all of the above are considerations.

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Definitions:

Issue Negotiable Instruments

The act of creating financial documents, such as checks or promissory notes, that are transferable from one party to another in exchange for value.

Borrow Money

The act of obtaining funds from another party (such as a bank or individual) under the agreement to repay the principal amount along with interest or other charges.

Ordinary Course Of Business

Activities and operations that are considered normal, routine, and in the usual scope of a company's business practices.

Limited Liability Partnership

A partnership arrangement that limits the liability of its partners for the debts of the partnership, such that no partner is responsible for the misconduct or negligence of another.