When Significant Differences Exist in Costs Allocated to Production Departments

question 28

Multiple Choice

When significant differences exist in costs allocated to production departments, cost management should use what method to find a more accurate cost allocation?

• A)Reciprocal method.
• B)Step method.
• C)Direct method.
• D)None of the above.

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Definitions:

Net Profit Margin Percentage

A financial ratio that shows the percentage of net income derived from total revenue, emphasizing the profitability of a company after all expenses have been deducted.

Financing Activities

These activities generate cash inflows and outflows related to borrowing from and repaying principal to creditors and completing transactions with the company’s owners, such as selling or repurchasing shares of common stock and paying dividends.

Cash Inflow

Cash inflow is the movement of money into a business from various sources, including sales, investment income, and financing activities.

Cash Flows

The total amount of money being transferred into and out of a business, especially affecting liquidity.