From the Perspective of a Manager of a Producing Department

question 90

Multiple Choice

From the perspective of a manager of a producing department, which of the following is a desired feature of a cost allocation received from a service department?

• A)The amount of the allocation should be based solely on the usage of the service by the producing department and not a function of the usage of the service by other departments.
• B)The budgeted cost should be allocated rather than actual service department costs.
• C)The allocation should force the production manager to pay for fluctuating demands that the production manager is creating.
• D)All of these answer choices are correct.

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Definitions:

Fair Value

An estimate of the price at which an asset or liability would be traded in a fair transaction between willing participants in the market.

Net Income

The remaining income of a business after deducting all expenditures and taxes from the gross revenue.

Equity Method

An accounting technique used by firms to assess the profits earned from their investments in other companies, where the investment is recorded at original cost and adjusted for the investor's share of the investee's profit or loss.

Outstanding Voting Stock

The shares of a corporation that are issued, held by shareholders, and entitled to vote in corporate decisions.