Which of the Following Engagement Observations Would Provide the Least

question 185

Multiple Choice

Which of the following engagement observations would provide the least motivation for management to amend or replace an existing cost accounting system?

• A) The distorted unit cost of a service is 50 percent lower than the true cost, while the true cost is 50 percent higher than the competition's cost.
• B) The organization is losing $1,000,000 annually because it incorrectly outsourced an operation based on information from its current system.
• C) The cost of rework, hidden by the current system, is 50 percent of the total cost of all services.
• D) 50 percent of total organizational cost has been allocated on a volume basis.

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Definitions:

Required Rate

A rephrased definition for the Required Rate of Return; it is the least annual percentage earned by an investment that will entice individuals or companies to put money into a particular security or project.

Expected Growth Rate

The anticipated increase in the value of an investment or index over a specific period of time.

Annual Dividend

The total dividend payment a company offers to its shareholders in a year.

Expected Return

The weighted average of all possible returns for an investment, considering the probabilities of each outcome.