There Are Several Methods for Allocating Service Department Costs to Production

question 130

Multiple Choice

There are several methods for allocating service department costs to production departments. The method which recognizes service provided by one service department to another but does not recognize reciprocal interdepartmental service is called: (CMA adapted)

• A) Direct method.
• B) Variable method.
• C) Linear method.
• D) Step method.

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Definitions:

Risk Arbitrage

Speculation on perceived security mispricing, often in connection with merger and acquisition targets.

One-Factor APT

A financial model that describes the relationship between a security's returns and a single factor affecting all securities, used to predict performance.

Risk-Free Rate

The theoretical rate of return on an investment with zero risk, typically represented by government bonds of a stable country.

Diversified Portfolios

A strategy that mixes a wide variety of investments within a portfolio to minimize risks.