Which of the Following Is an Appropriate Base to Distribute

question 51

Multiple Choice

Which of the following is an appropriate base to distribute the cost of building depreciation to responsibility centers?

• A) Number of employees in the responsibility centers.
• B) Budgeted sales dollars of the responsibility centers.
• C) Square feet occupied by the responsibility centers.
• D) Budgeted net income of the responsibility centers.
• E) Total budgeted direct operating costs of the responsibility centers.

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Definitions:

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating how fixed and variable costs impact a firm's earnings.

Optimal Capital Structure

The combination of debt and equity that minimizes a company's cost of capital and maximizes its value.

Debt

Debt is an amount of money borrowed by one party from another, typically involving repayment of the principal amount along with interest.

Operating Leverage

A metric assessing the impact of increased sales on operational earnings, revealing the balance between a firm's fixed and variable expenses.