When Determining the Full Cost of a Cost Object

question 5

Multiple Choice

When determining the full cost of a cost object:

• A) indirect costs are not allocated.
• B) none of the options are correct.
• C) the indirect costs need to be allocated to the cost object on the basis of its usage of a chosen cost driver or drivers.
• D) non-manufacturing costs are always expensed in the current period.

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Definitions:

Average Collection Period

Measures the time, on average, it takes for a company to receive payments owed by its customers, indicating the efficiency of its credit and collection policies.

Cumulative Surplus

The total accumulated amount of profits, after all expenses and dividends are paid, that a company has at its disposal for reinvestment or distribution.

Minimum Cash Balance

The smallest amount of cash that a company seeks to maintain in its accounts to ensure financial stability and operational efficiency.

Accounts Receivable Balance

The total amount of money owed to a company by its customers for goods or services provided on credit, yet to be paid.