A Manufacturer Utilizes Three Separate Indirect Cost Pools

question 120

Multiple Choice

A manufacturer utilizes three separate indirect cost pools. Which of the following is true?

• A) Each indirect cost pool utilizes a separate cost-allocation rate
• B) Each indirect cost pool is a subset of total direct costs
• C) Each indirect cost pool relates to multiple cost centers
• D) Each indirect cost pool utilizes the same cost-allocation rate for all costs incurred

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Definitions:

Operating Income Before

An earnings before interest and taxes measure that evaluates a company's profit from operations before the impact of financing and tax expenses.

Operating Income Before

Income derived from regular business operations before deductions such as interest and taxes.

Support Department Allocations

The process of distributing overhead costs from support or service departments to producing or operating departments based on their usage of those services.

Operating Income

Earnings before interest and taxes (EBIT), indicating the profitability from regular business operations.