If a Cost Must Be Arbitrarily Allocated in Order to Be

question 90

True/False

If a cost must be arbitrarily allocated in order to be assigned to a particular segment, then that cost should not be considered a common cost.

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Definitions:

Collecting Cash

The process of receiving cash, usually from customers, as payment for goods or services or as repayment of obligations.

Cash Flows

The total amount of money being transferred into and out of a business, especially affecting its liquidity.

Financial Statements

Summarized records of a company's financial activities over a specific period, including income statement, balance sheet, statement of cash flows, and statement of changes in equity.

Operating Activities

Operating activities involve the day-to-day functions of a business related to producing and selling its goods or services, reflected in the cash flows from operating activities in financial statements.