The Approach Often Used When Dealing with Small Amounts of Underallocated

question 136

Multiple Choice

The approach often used when dealing with small amounts of underallocated or overallocated overhead is the ________.

• A) adjusted allocation-rate approach
• B) proration approach
• C) write-off to cost of goods sold approach
• D) adjusted write-off approach

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Definitions:

Portfolio Duration

A measure of the sensitivity of a portfolio's value to changes in interest rates, often used for managing the interest rate risk.

Interest Rates

The expense associated with obtaining a loan, or the incentive for depositing funds, usually shown as a percentage of the original amount.

Zero-Coupon Bond

A bond that does not pay periodic interest payments but is issued at a deep discount from the face value and is redeemed at the face value at maturity.

Duration

A measure of the sensitivity of the price of a financial asset or liability to changes in interest rates, often used with bonds to assess interest rate risk.