The Type of Department That Generates Revenues and Incurs Costs

question 13

Multiple Choice

The type of department that generates revenues and incurs costs, and its manager is responsible for the investments made in operating assets is called a(n) :

• A) Cost center
• B) Service department
• C) Responsibility center
• D) Investment center
• E) Profit center

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Definitions:

Cost of Capital

The essential return needed to justify the investment in a capital budgeting project, like constructing a new manufacturing facility.

Market Value

Today's market rate for the purchase or sale of services or assets.

Flotation Cost

Costs a company faces when it issues new securities, encompassing fees for underwriting, legal services, registration, and printing.

WACC

A measurement called the Weighted Average Cost of Capital assesses the cost of a business's capital, where every capital category is assigned a proportional weight.