Use the Information Below to Answer the Following Question(s)

question 145

Multiple Choice

Use the information below to answer the following question(s) .The owner of Hi-Tech Fiberglass Fabricators Inc.is interested in using the reciprocal allocation method.The following data from operations were collected for analysis.Budgeted manufacturing overhead costs:
Service furnished:
By Plant Maintenance (budgeted labour hours)
By Data Processing (budgeted computer time)

-Which of the following is a valid conclusion, in comparing the three allocation methods?

• A)The reciprocal method is conceptually inferior.
• B)The direct method is viewed as too complex by most organizations.
• C)The step-down method is viewed as too complex by most organizations.
• D)Many managers find the step-down method too simple.
• E)Many managers find the reciprocal method difficult to understand.

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Definitions:

Raw Materials

Fundamental substances or components used in the initial stages of the manufacturing process to produce goods.

Cash Disbursements

The payment of cash by a business for expenses, purchases, or obligations.

Sales

The total amount of revenue generated from selling goods or services over a given period.

Retained Earnings

Retained earnings represent the portion of a company's net income that is kept within the company after dividends are paid to shareholders, used for reinvestment or debt payment.