Which of the Following Allocation Methods Fully Recognizes Services That

question 29

Multiple Choice

Which of the following allocation methods fully recognizes services that support departments provide to each other?

• A)direct method
• B)sequential method
• C)reciprocal method
• D)all of the above

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Definitions:

Contribution Margin

The amount by which the sale of products or services exceeds variable costs, contributing to the coverage of fixed costs and profit generation.

Controllable Fixed Costs

Fixed costs that can be adjusted or influenced by the decisions of management in the short term, such as advertising expenses.

Required Return

The minimum expected return an investor demands for an investment, reflecting its risk level.

Investment Centers

Business units or departments that are directly responsible for generating returns on assets allocated to them.