What Are Some of the Problems Which the Use of Common

question 27

Multiple Choice

What are some of the problems which the use of Common Costs raises for Cost of Service Pricing,particularly the Average Cost approach?

• A) Rates based upon average or fully allocated cost makes it necessary to apportion common costs by some arbitrary means.
• B) Motor carriers are structured such as to make allocation extremely difficult.
• C) Rail carriers have difficulty defining their common costs as they have wide spread geographic operations
• D) All transport firms have significant difficulty with cost concepts due the very nature of their operations

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Definitions:

Gain or Loss

The financial result that occurs when the selling price of an asset differs from its book value.

Current Rate Method

An accounting method for translating foreign currency financial statements where all current-year items are translated at the present exchange rate.

Ending Inventory

The total value of goods available for sale at the end of an accounting period.