When a Department or Product Line Is Dropped, the Common

question 40

Multiple Choice

When a department or product line is dropped, the common fixed costs that had been allocated to that department

• A)are eliminated.
• B)become variable costs.
• C)are allocated to the remaining departments or product lines.
• D)become sunk costs.

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Definitions:

Obligations

Legal or moral duties or responsibilities that an individual or entity is bound to perform or fulfill towards others.

Constructive Notification

For third parties who have previously dealt with the agent or who have begun to deal with the agent. This is accomplished by advertising the agency’s termination in a newspaper of general circulation in the place where the agency business regularly was carried on.

Apparent Authority

The appearance or assumption of authority based on the actions or statements of the alleged principal, leading others to believe someone has the authority to act on behalf of a company or individual.

Insanity

A mental disorder of such a severe nature that a person cannot distinguish fantasy from reality, conduct their affairs due to psychosis, or is subject to uncontrollable impulsive behavior.