To Decide the Type and Number of Cost Pools to Use

question 6

Multiple Choice

To decide the type and number of cost pools to use for support cost allocation, managers should consider the:

• A) Reasons for allocating support department costs
• B) Ability of operating departments to bear the costs
• C) Method they plan to use for the allocation
• D) Allocation base

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Definitions:

Secondary Reserves

Liquid assets held by financial institutions as a backup to primary reserves, used to meet unforeseen demands.

Government Securities

Financial instruments issued by a government to finance its fiscal deficit, including bonds, bills, and notes, which are considered low-risk investments.

Required Reserve Deposits

The portion of depositors' balances that banks must have on hand as cash or on deposit with the central bank, as stipulated by the reserve requirement regulations.

Federal Reserve Board

The governing body of the Federal Reserve System, responsible for overseeing U.S. monetary policy and regulating banks.