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In Some Local Government Financial Reports You Will Find Activities

question 14

Essay

In some local government financial reports you will find activities such as solid waste disposal and sewage disposal accounted for as a part of the General Fund. In other reports apparently identical activities are accounted for as enterprise funds. When is a government required to establish an enterprise fund?


Definitions:

Direct Material

Raw materials that are directly traceable to the manufacturing of a specific product and constitute a significant portion of the production costs.

Seasonal Product

A type of product whose demand and availability significantly depend on the season or time of the year.

Total Contribution Margin

The difference between sales revenue and total variable costs, indicating the amount contributing to covering fixed costs and profit.

Operating Leverage

The ratio of fixed costs to total costs. The higher a firm’s operating leverage, the greater will be the variability of profits for a given change in sales.

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