Because ABC Is an Allocation, It Involves the Two Steps

question 24

True/False

Because ABC is an allocation, it involves the two steps involved in any allocation - compute the allocation rate and multiply the rate by the number of cost driver units in a cost object.

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Definitions:

Optimal Capital Structure

The most favorable mix of debt and equity financing that minimizes the company's cost of capital and maximizes its value.

EPS

Earnings Per Share, a financial metric used to indicate the profitability of a company on a per-share basis.

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenue.

Financial Leverage

The use of borrowed funds with the goal to increase the potential return on investment.