(Appendix 12B)For Performance Evaluation Purposes, the Variable Costs of a Service

question 19

Multiple Choice

(Appendix 12B) For performance evaluation purposes, the variable costs of a service department should be charged to operating departments using:

• A)the actual variable rate and the budgeted level of activity for the period.
• B)the budgeted variable rate and the actual level of activity for the period.
• C)the budgeted variable rate and the budgeted level of activity for the period.
• D)the actual variable rate and the peak-period or long-run average servicing capacity.

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Definitions:

Profit-Maximizing Monopoly

A monopoly that adjusts its output level to where marginal costs equal marginal revenues to achieve the highest possible profit.

Additional Unit

In economics, refers to the next item or unit of production, used in analyzing the costs and benefits of producing one more unit of a good or service.

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the total quantity produced, representing the cost per unit of output.

Monopolist Profit

The profit earned by a monopolist, which arises from controlling the market supply of a good or service and setting prices above marginal costs.