A Key Ethical Issue in Cost Allocation Involves Costing in an International

question 89

Multiple Choice

A key ethical issue in cost allocation involves costing in an international context, because the choice of a cost allocation method can affect:

• A)Management reward systems.
• B)Management fraud.
• C)Taxes in domestic and foreign countries.
• D)The firm's financial statements.
• E)The fair share of cost by a governmental unit.

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Definitions:

Machine-Hours

The duration, typically measured in hours, that machinery is in operation for producing goods during a specific timeframe.

Departmental Predetermined Overhead Rates

Rates used to allocate indirect costs to products or services, computed in advance for each department within a company.

Machine-Hours

A measure of production volume or activity based on the number of hours machines are operated in the manufacturing process.

Applied Manufacturing Overhead

Costs related to production that are not directly associated with the product but are allocated to it, such as utilities or maintenance expenses of the production facility.