While Allocating Corporate Costs to Divisions ________

question 56

Multiple Choice

While allocating corporate costs to divisions ________.

• A) only fixed costs should be allocated
• B) no homogeneous cost pools should be constructed
• C) all the costs in the cost pool should not have the same or a similar cause-and-effect or benefits-received relationship with the cost-allocation base
• D) allocate both variable and fixed costs to divisions and then to customers

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Definitions:

Accruals

Accruals are accounting adjustments for revenues and expenses that have been earned or incurred but not yet recorded in accounts due to the timing of cash flows.

Prepayments

Payments made in advance for goods or services, recorded as assets on the balance sheet until the actual goods or services are received.

Revenue Recognition

Revenue recognition is the accounting principle that outlines the specific conditions under which revenue is recognized or accounted for, typically when goods or services are delivered and the payment is assured.

Performance Obligation

A duty or task that a company must execute to transfer goods or services to a customer under the terms of a contract.