Managers Need to Clarify Their Reasons for Allocating Support Department

question 88

True/False

Managers need to clarify their reasons for allocating support department costs before establishing cost pools.

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Definitions:

Cost of Capital

Cost of capital represents the return rate an entity must pay to its stakeholders in order to justify the use of capital in the business.

Initial Outflow

The initial cash expenditure required to undertake an investment or project.

Average Accounting Return

A measure of investment profitability calculated as the average annual net earnings of a project divided by the average investment in the project.

Straight-Line Method

An accounting method for allocating the cost of an asset evenly over its useful life.