The Fixed Costs of Service Departments Should Be Allocated to Production

question 10

Multiple Choice

The fixed costs of service departments should be allocated to production departments based on

• A)actual short-run utilization based on predetermined rates.
• B)actual short-run units based on actual rates.
• C)the service department's expected costs based on expected long-run use of capacity.
• D)the service department's actual costs based on actual utilization of services.

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Definitions:

Marginal Product

The increase in output that results from employing one more unit of a specific input, holding all other inputs constant.

Bushels

A unit of volume that is used in the United States for measuring agricultural products, such as grains.

Marginal Product

The increase in output resulting from a one-unit increase in the amount of a single input used, holding all other inputs constant.

Total Product Curve

A graphic representation showing how the total quantity of output of a firm changes as the quantity of an input is changed, holding all other inputs constant.