Consider the Following Statements About Service Department Costs

question 5

Multiple Choice

Consider the following statements about service department costs:
I. The costs of the Human Resources Department in a manufacturing organization must be allocated to production departments in order to achieve a correct costing of inventory.
II. The allocation of service department costs requires that an organization select both an allocation base and an allocation method.
III. Service department cost allocations are more relevant for firms involved in service industries (e.g., repair, health care) than for those involved with manufacturing.
Which of the above statements is (are) correct?

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

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Definitions:

Overpumping

Pumping of groundwater at a rate that causes severe lowering of the water table in the aquifer or other detrimental effects.

Horizontal

Describes a direction parallel to the ground or the horizon; at 90 degrees to the vertical.

Groundwater

Water present beneath the Earth's surface in soil pore spaces and in the fractures of rock formations.

Fractures

Breaks in rock or bone, often as a result of stress exceeding the material's internal strength.