When the Cost of Services from a Shared Activity Is

question 76

Multiple Choice

When the cost of services from a shared activity is ________ the cost of comparable services provided by a division itself or by an outside supplier than the division, general managers have a strong incentive ________.

• A) less than; to use the services of shared activities
• B) greater than; to use the services of shared activities
• C) less than; to use the services of an outside supplier
• D) equal to; to use the services of an outside supplier

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Definitions:

Finished Goods

Products that have undergone the manufacturing process and are ready for sale to consumers.

Raw Materials

Basic substances in their natural, modified, or semi-processed states used as an input in the manufacture of goods.

Predetermined Overhead Rate

A rate calculated before the accounting period begins, used to allocate projected overhead costs to products or services based on expected activity levels.

Actual Cost Driver

A factor that directly impacts the expenses associated with a specific activity, determining the actual costs incurred.