Which of the Following Is True About Cost Allocation

question 5

Multiple Choice

Which of the following is true about cost allocation?

• A)Cost allocation is a form of transfer pricing for indirect costs
• B)Cost allocation is an internal tax on services
• C)Cost allocation distorts choices that managers would make otherwise
• D)Cost allocation should be imposed when marginal cost exceeds average cost of an internal resource
• E)All of the choices are correct

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Definitions:

Portfolio

A collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including closed funds and exchange traded funds.

Securities

Financial instruments that represent an ownership position, a creditor relationship, or rights to ownership, expressed in the form of stocks, bonds, or options.

Rate of Return

The percentage gain or loss on an investment over a specified period, reflecting the income and appreciation of an investment.

Average Cumulative Investment

The total sum of all investments made over a period of time, divided by the number of investments.