Which of the Following Is TRUE Concerning Cost Allocation in a Multi-Product

question 133

Multiple Choice

Which of the following is TRUE concerning cost allocation in a multi-product company?

• A)Where the indirect costs are variable and each product is assembled sequentially, the causality criterion can guide the choice of a cost allocation base.
• B)Where the indirect costs are fixed and each product is assembled sequentially, the causality criterion can guide the choice of a cost allocation base.
• C)Where the indirect costs are variable and each product is not assembled sequentially, the causality criterion can guide the choice of a cost allocation base.
• D)Where the indirect costs are fixed and each product is not assembled sequentially, the causality criterion can guide the choice of a cost allocation base.
• E)Where the indirect costs are fixed and the products are produced jointly, it is possible to identify specific cause-and-effect relationships between work on an individual product and total costs incurred.

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Definitions:

Capital Expenditures

Funds used by a company to acquire or upgrade physical assets such as equipment, property, or industrial buildings.

Functional Depreciation

A decrease in the usefulness or value of an asset resulting from obsolescence, wear and tear, or age.

Fixed Asset

A long-term tangible piece of property that a firm owns and uses in its operations to generate income.

Book Value

The net value of a company's assets minus its liabilities and preferred stock, reflecting the amount that shareholders would theoretically receive if the company was liquidated.