Which of the Following Cost Allocation Methods Would Be Used

question 115

Multiple Choice

Which of the following cost allocation methods would be used to determine the lowest price that could be quoted for a special order that would utilize idle capacity within a production area?

• A)Job order
• B)Process
• C)Variable
• D)Standard

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Definitions:

Perfectly Competitive Firm

A firm operating in a market where there are many buyers and sellers, with none being able to influence the market price of the product.

Marginal Cost

The charges incurred from the production of an extra unit of a product or service.

Short-run Profits

Profits earned by a firm when it operates under short-term constraints, where at least one input is fixed.

Average Total Cost

The total cost of production divided by the number of units produced, representing the average cost per unit of output.