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:

Price-Earnings Ratio

A valuation ratio of a company's current share price compared to its per-share earnings.

Fixed Assets

Long-term tangible assets that are used in the operations of a business and are not expected to be converted to cash within a year.

Dutch Auction

A method of auction in which the price of the item is reduced until it meets a bid.

Shares

Portions of ownership in a corporation or financial asset.