When Allocating Service Department Costs, Companies Should Use

question 67

Multiple Choice

When allocating service department costs, companies should use:

• A) actual costs rather than budgeted costs, and separate rates for variable and fixed costs.
• B) budgeted costs rather than actual costs, and separate rates for variable and fixed costs.
• C) budgeted costs rather than actual costs, and a rate that combines variable and fixed costs.
• D) actual costs rather than budgeted costs, and a rate that combines variable and fixed costs.
• E) a rate that is based on matrix theory.

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Definitions:

Non-current Assets

Long-term investments or assets that are not expected to be converted into cash or used up within the business cycle of one year or the operating cycle, whichever is longer.

Bank Indebtedness

A financial obligation or debt to a bank, often in the form of loans, overdrafts, or lines of credit.

Current Liability

An obligation that a company is expected to pay within the next year or within the normal operating cycle.

Non-current Liability

Long-term financial obligations that are due beyond one year or beyond the normal operating cycle.