Regardless of the System Used in Departmental Cost Analysis

question 112

Multiple Choice

Regardless of the system used in departmental cost analysis:

• A) Direct costs are allocated, indirect costs are not.
• B) Indirect costs are allocated, direct costs are not.
• C) Both direct and indirect costs are allocated.
• D) Neither direct nor indirect costs are allocated.
• E) Total departmental costs will always be the same.

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Definitions:

Rate of Return

The gain or loss of an investment over a specified period, expressed as a percentage of the investment's initial cost.

Target Cost Approach

A pricing method where the selling price is set first, and then the target cost is determined by subtracting a desired profit margin.

Markup

The amount added to the cost of goods to cover overhead and profit, determining the selling price.

Selling Price

The amount of money charged for a product or service, determined by adding a profit margin to the product cost.