The Underlying Principle of Allocating Direct Operating Expenses to Departments

question 175

True/False

The underlying principle of allocating direct operating expenses to departments is to assign to each department an amount of expense proportional to the revenues of that department.

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Definitions:

Short-Run Aggregate Supply

The total production of goods and services in an economy at different price levels over a short period, during which some production costs are fixed.

Potential Output

The highest level of real GDP that can be sustained over the long term without increasing inflation.

Price Level

The average of all current prices for goods and services in an economy, reflecting the cost of living.

Real GDP

Gross Domestic Product corrected for the effects of inflation, offering a better measure of the true scale and expansion of an economy.