WST Corporation Uses Actual Amounts to Calculate Support Department Cost

question 99

Multiple Choice

WST Corporation uses actual amounts to calculate support department cost allocation rates. A disadvantage of this practice is:

• A) Managers are held responsible for actual usage.
• B) Support charges are known in advance by managers.
• C) If one department uses much less of a support department's services than others, the support charge to remaining departments will increase to compensate.
• D) Managers cannot measure the value of support services used.

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Definitions:

OM Function

Operations management function, which involves the responsibility for planning, organizing, and supervising the processes that produce a company's goods or services.

Money Transfers

The process of moving funds from one account or individual to another, through various methods such as electronic transfers, wire transfers, or checks.

Multifactor Productivity

Indicates the ratio of the goods and services produced (outputs) to many or all resources (inputs).

Capital Acquisition

The process of acquiring funds or assets for the purpose of investment or enterprise growth.