Which Purpose of Cost Allocation Is Used to Decide on the Selling

question 157

Multiple Choice

Which purpose of cost allocation is used to decide on the selling price for a customized product or service?

• A)to provide information for economic decisions
• B)to motivate managers and other employees
• C)to justify costs
• D)to measure income and assets for reporting to external parties
• E)to compute reimbursement

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Definitions:

Depreciation Process

The systematic reduction in the recorded cost of a fixed asset over its useful life, reflecting its decrease in value over time.

Matching Principle

An accounting principle that dictates expenses should be recognized in the same period as the revenues they help to generate.

Market Value

The present rate at which a service or asset is available for purchase or sale in the marketplace.

Capitalized Interest

Interest expenditures included in the cost of a self-constructed asset