If a Budgeted Activity Base Is Used as the Base

question 31

Multiple Choice

If a budgeted activity base is used as the base in cost allocation,each department's cost allocation will be predictable,and not influenced by the:

• A)actual total cost.
• B)change in activity.
• C)variations from budget.
• D)errors in calculations.
• E)actual usage in other departments.

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Definitions:

Payback Method

An approach within capital budgeting that determines how long it takes to regain the initial outlay for an investment.

Mutually Exclusive

This term describes options or decisions that cannot occur simultaneously; choosing one means forgoing the others.

Required Rate

The minimum percentage return that an investment must yield to be considered acceptable. It is essentially another term for the required return on investment, critical for financial planning and analysis.

Cash Flows

Cash flows are the net amount of cash and cash-equivalents being transferred into and out of a business.