The Process of Allocating Support Department Costs Begins With

question 72

Multiple Choice

The process of allocating support department costs begins with:

• A) Choosing an allocation method
• B) Clarifying the purpose of the allocation
• C) Establishing cost pools
• D) Choosing an allocation base

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Definitions:

Average Total Cost

The total cost of producing a specific quantity of a good or service divided by the quantity produced, representing the per-unit cost of production.

Marginal Cost

The extra expense incurred from the production of an additional unit of a product or service.

TVC

Total Variable Costs; the sum of all costs that vary with the level of production, such as materials and labor directly involved in creating a product.

Total Fixed Cost

The sum of all costs that remain constant regardless of the level of production or output in the short term.