Allocating Service Department Costs to Revenue-Producing Departments Is an Alternative

question 15

Multiple Choice

Allocating service department costs to revenue-producing departments is an alternative to

• A)responsibility accounting.
• B)the use of profit centers.
• C)the use of cost centers.
• D)a transfer pricing system.

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Definitions:

Interest Rate

The amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal.

ROA

Return on Assets, a financial ratio that shows the percentage of profit a company earns in relation to its overall resources.

ROE

Return On Equity; a measure of a corporation's profitability that reveals how much profit a company generates with the money shareholders have invested.

Operating ROA

A financial ratio that measures the efficiency of a company's operation by dividing its operating income by its total assets.