Advantages of Using Budgeted Values to Calculate Support Department Cost

question 63

Multiple Choice

Advantages of using budgeted values to calculate support department cost allocation rates include:
I. Managers know support department costs in advance
II. Managers are motivated to use support department services efficiently
III. Allocated support costs for the period are not affected by actual usage so managers have little incentive to minimize the use of support services

• A) I and II only
• B) I and III only
• C) II and III only
• D) I, II, and III

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Definitions:

Indirect Bankruptcy Costs

The difficulties of running a business that is experiencing financial distress.

Bankruptcy Filing

A legal process through which individuals or businesses unable to meet their debts can seek relief from some or all of their obligations.

Financially Distressed

A condition in which a company or individual cannot generate revenue or income, which results in challenges in paying its financial obligations.

Direct Cost

Expenses that can be directly tied to the production or sale of a specific product or service.