The Direct Method of Allocating Service Department Costs Does Not

question 147

True/False

The direct method of allocating service department costs does not take into account the fact that service departments often provide assistance to other service departments.

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Definitions:

Marginal Cost

is the increase in total cost that arises from producing one additional unit of a product or service.

Total Fixed Cost

The total fixed cost refers to the sum of all costs that do not change with the level of output produced by a company or during a specific period.

Maximum Profit

The highest possible financial gain a firm can achieve when the difference between total revenue and total cost is at its greatest.