Which of the Following Is True of the Arbitrary Allocation

question 85

Multiple Choice

Which of the following is true of the arbitrary allocation method?

• A)This method is not considered to be particularly weak.
• B)This method keeps ad spending within reasonable limits.
• C)This method uses a logical basis for determining the budgets.
• D)This method of budgeting is generally stable.
• E)This method has no obvious advantages.

Determine the relevance of sunk costs and their exclusion from future business decisions.

Conduct differential analysis for further processing and make or buy decisions.

Apply the variable cost concept in setting prices and calculating desired profits.

Utilize the total cost concept for product pricing and understand its distinction from the variable cost concept.

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Definitions:

Present Value

A financial concept that describes the value of a sum of money to be received in the future, expressed in today's dollars, accounting for a specific rate of return or discount rate.

Net Cash Flows

The difference between cash inflows and outflows within a specified period.

Annual Operating Cash Inflows

The amount of money a business expects to receive from its operations over the course of a year.

Discount Rate

In discounted cash flow examination, the discount rate is used to evaluate the contemporary value of future cash inflows.