In an Internal Service Fund, the Expectation Is That

question 13

Multiple Choice

In an Internal Service Fund, the expectation is that

• A) Each year's revenues should equal each year's expenses because the revenues are simply an allocation of that year's expenses.
• B) Each year's revenues should equal each year's expenditures because the revenues are simply an allocation of that year's expenditures.
• C) Accumulated revenues over time should approximately equal the accumulated expenses over time.
• D) Expenses will exceed revenues because depreciation expense is reported in an Internal Service Fund.

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Definitions:

Break-even Analysis

A financial calculation to determine the sales volume at which a business neither makes a profit nor a loss.

Cost-volume-profit Analysis

An accounting method used to determine how changes in costs and volume affect a company's operating income and net income.

Sales Mix

The proportion of different products or services that a business sells, significant because it can affect the company's overall profitability depending on the contribution margin of each item.

Unit Contribution Margin

The difference between the selling price per unit and the variable cost per unit. This metric indicates how much each unit sold contributes to fixed costs and profit.