One Department Indirect-Cost Rate Is Sufficient When

question 54

Multiple Choice

One department indirect-cost rate is sufficient when:

• A)activities relate to more than one level of the cost hierarchy
• B)product costs are significantly cross-subsidized
• C)the same allocation base is appropriate for all departmental activities
• D)it is a service department

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Definitions:

Accounts Receivable Period

The accounts receivable period is the average number of days it takes for a company to collect payments owed by its customers after a sale has been made.

Expected Sales

The projected amount of sales that a company anticipates to achieve within a specific period.

Average Collection Period

The average number of days it takes a company to receive payment after a sale has been made.

Operating Cycle

The period between the acquisition of inventory and the collection of receivable generated from sales, reflecting how long it takes for a business to convert its inventory into cash.