Which of the Following Statements Is True About the Sequential

question 127

Multiple Choice

Which of the following statements is true about the sequential method of allocating support department costs to production departments?

• A)The sequential method is also known as the step-up method.
• B)The sequential method captures some but not all the inter-support-department services by allocating support departments to other support departments and production departments in a series of steps.
• C)The sequential method requires that the same cost driver be used for each support department.
• D)The sequential method is less accurate than the direct method.

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Definitions:

Inventory Turnover Ratio

A measure of how often a company sells and replaces its stock of goods during a period, calculated as cost of goods sold divided by average inventory.

Gross Profit

The difference between revenue and the cost of goods sold before deducting overhead, payroll, taxation, and interest payments.

Net Sales

Revenue from goods or services sold minus returns, allowances, and discounts.

Return On Equity (ROE)

A measure of financial performance, calculated by dividing net income by shareholder equity, indicating how well a company uses investments to generate earnings growth.