Which of the Following Is nottrue Regarding Proprietary Funds

question 5

Multiple Choice

Which of the following is nottrue regarding proprietary funds?

• A) Enterprise funds are used by governments to account for services provided to the general public on a user-charge basis.
• B) General obligation bonds that will be paid from enterprise revenues must be reflected in the accounts of enterprise funds.
• C) Internal service self-insurance should set fees based on anticipated charges or a long-range plan to break even over time.
• D) The operation of internal service funds has no impact on other funds because it is run as a business and provides services that would have been purchased elsewhere by the other funds.

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Definitions:

Contribution Format Income Statement

An income statement format that separates fixed costs from variable costs, thus showing the contribution margin.

Degree of Operating Leverage

A financial ratio that measures the sensitivity of a company's operating income to its sales, indicating how revenue growth translates into growth in operating income.

Variable Expenses

Costs that change in proportion to the level of business activity or production volume.

Fixed Expenses

Costs that do not fluctuate with changes in production level or sales volume, remaining constant over a period.