Which Service Department Cost Allocation Method Considers All Interrelationships of the Departments

question 75

Multiple Choice

Which service department cost allocation method considers all interrelationships of the departments and reflects these relationships in equations?

• A)step method
• B)indirect method
• C)algebraic method
• D)direct method

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Definitions:

Average Variable Cost

The cost per unit of output, excluding fixed costs, calculated by dividing total variable costs by the number of units produced.

Marginal Cost

The expenditure involved in creating one more unit of a product or service.

Average Variable Cost

The cost per unit of producing additional units, excluding fixed costs, and is calculated by dividing total variable costs by the quantity of output.

Total Costs

The complete sum of all expenses a business incurs to produce its goods or services, including both fixed and variable costs.