Variable Service Department Costs Should Be Charged to Operating Departments

question 42

Multiple Choice

Variable service department costs should be charged to operating departments at the end of the period according to the formula:

• A) Budgeted rate x Budgeted activity.
• B) Budgeted rate x Actual activity.
• C) Actual rate x Actual activity.
• D) Budgeted total cost x Percentage of peak-period capacity required.

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Definitions:

Circulating Security Interest

A floating charge over all of a company.

Floating Charge

A security interest over a fluctuating pool of assets, such as inventory or receivables, which allows the borrower to use the assets in the course of business.

Liquidator

A person or entity appointed to wind up the affairs of a company and dispose of its assets in the event of its liquidation.

Winding Up

The process of concluding a company's affairs, settling its liabilities, and distributing the remaining assets to the shareholders or owners.