Smaller Cost Distortions Occur When the Traditional Systems' Single Indirect-Cost

question 143

Multiple Choice

Smaller cost distortions occur when the traditional systems' single indirect-cost rate and the activity-cost-driver rates ________.

• A) use the same total costs for computations
• B) are similar in proportion to each other
• C) are more different than alike
• D) use the same cost driver units

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Definitions:

Prompt Payment Discount

A reduction in the amount owed by a buyer to a seller, provided the payment is made within a specified timeframe.

Borrowing Rate

The interest rate charged by banks or financial institutions on loans to their customers.

Accruals

The accounting practice of recording revenues and expenses when they are incurred, regardless of when cash transactions occur.

Vendor Invoices

Documents issued by a supplier to the purchaser detailing the sale transaction and requesting payment.