The Practical Capacity Method of Allocating Costs Is

question 83

Multiple Choice

The practical capacity method of allocating costs is:

• A)based on the budgeted capacity demanded.
• B)based on actual capacity used.
• C)based on the practical capacity supplied.
• D)based on the using departments negotiating the charges they will accept.

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Definitions:

Forward Exchange Rate

An agreed-upon exchange rate for currencies to be exchanged on a predetermined future date, used to hedge against currency market fluctuations.

Interest Rate Parity (IRP)

The condition stating that the interest rate differential between two countries is equal to the difference between the forward exchange rate and the spot exchange rate.

Net Present Value

The difference between the present value of cash inflows and outflows over a period of time; used in capital budgeting to analyze the profitability of a projected investment or project.

Foreign Currency

Foreign Currency denotes any currency other than the home currency of a country, used in international trade and investment.