For Performance Evaluation Purposes, the Fixed Costs of a Service

question 17

Multiple Choice

For performance evaluation purposes, the fixed costs of a service department should be charged to operating departments using:

• A) actual fixed costs and the budgeted level of activity for the period.
• B) budgeted fixed costs and the actual level of activity for the period.
• C) budgeted fixed costs and the peak-period or long-run average servicing capacity.
• D) actual fixed costs and the peak-period or long-run average servicing capacity.

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Definitions:

U.S. GAAP

United States Generally Accepted Accounting Principles, which constitute the framework of guidelines for financial accounting used in the US.

Interest Expense

The charge for borrowing money typically calculated as a rate of the principal amount annually.

Net Operating Losses

A situation where a company's operating expenses exceed its revenues, which can have tax implications and affect future earnings reports.

Debenture Bonds

Unsecured bonds that rely on the creditworthiness and reputation of the issuer for support, without specific collateral.