Under Dual-Cost Allocation, Fixed Costs Are Allocated on the Basis

question 36

Multiple Choice

Under dual-cost allocation, fixed costs are allocated on the basis of a user department's:

• A) long-run usage of a service department's output.
• B) short-run usage of a service department's output.
• C) long-run usage and short-run usage of a service department's output.
• D) neither long-run usage nor short-run usage of a service department's output.
• E) either long-run usage or short-run usage of a service department's output.

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Definitions:

Inventory Turnover

A ratio indicating how many times a company's inventory is sold and replaced over a specific period.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term financial health and operational efficiency of a business.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term and long-term obligations, calculated as current assets divided by current liabilities.

Acid-test Ratio

A financial metric that measures a company's ability to pay off its current liabilities with its most liquid assets without relying on the sale of inventory.