The Biggest Advantage of Using Practical Capacity to Allocate Costs

question 32

Multiple Choice

The biggest advantage of using practical capacity to allocate costs is that it ________.

• A) focuses the user's division with the costs of overused capacity
• B) never causes over or under-allocated overhead
• C) burdens the user divisions with the costs of unused capacity
• D) focuses management's attention on unused capacity

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Definitions:

Efficiently Allocating

The process of distributing resources in a manner that maximizes the net benefits received from their use.

Long-term Investment

Assets that are held for an extended period, typically over one year, to generate growth, income, or capital gains, such as stocks or real estate.

Present Value

The existing value of a forthcoming sum of money or cash flow sequence, adjusted for a specific return rate.

Inflation

The rate at which the general level of prices for goods and services is rising, eroding purchasing power.