Advantages of Using Budgeted Values to Calculate Support Department Cost

question 63

Multiple Choice

Advantages of using budgeted values to calculate support department cost allocation rates include:
I. Managers know support department costs in advance
II. Managers are motivated to use support department services efficiently
III. Allocated support costs for the period are not affected by actual usage so managers have little incentive to minimize the use of support services

• A) I and II only
• B) I and III only
• C) II and III only
• D) I, II, and III

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Definitions:

Hedge Effectiveness

A measure of how well a hedge transaction reduces the risk of the exposure that the hedge was intended to protect against.

Economic Relationship

Refers to the interactions between different economic variables or entities, such as the connection between supply and demand or investment and economic growth.

Hedge Ratio

A ratio used to measure the proportion of a position that is hedged, indicating the effectiveness of a hedge against fluctuations.

Fair Value Hedge

A hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, or some component thereof, that is attributable to a particular risk and could affect profit or loss.