Allocating Fixed Costs Based on Long-Range Plans May Inadvertently Encourage

question 51

Multiple Choice

Allocating fixed costs based on long-range plans may inadvertently encourage managers to _____.

• A)underutilize available capacity
• B)overestimate planned usage
• C)underestimate planned usage
• D)overestimate planned cost

---

Definitions:

Sales Discounts

Reductions in the price of a product or service offered to incentivize prompt payment by the customer.

Sales Returns

Transactions in which customers return previously purchased merchandise, leading to a refund.

Operating Expenses

Costs associated with the day-to-day operations of a business, such as rent, utilities, and salaries, excluding direct production costs.

Perpetual Inventory System

An inventory accounting system that employs computerized point-of-sale systems and enterprise asset management software to instantly register the purchase or sale of inventory items.