For Performance Evaluation Purposes,the Best Way to Charge the Fixed

question 26

True/False

For performance evaluation purposes,the best way to charge the fixed costs of a service department to operating departments is with an allocation base such as direct labor-hours that reflects the actual level of activity for the period.

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Definitions:

Differential Costs

The difference in cost between two alternative decisions, or a change in expenses that would occur due to a particular choice.

Differential Analysis

The area of accounting concerned with the effect of alternative courses of action on revenues and costs. Also called incremental analysis.

Unprofitable Segment

A part of an organization that consistently fails to contribute a positive net income or adds a financial loss to the company's overall performance.

Opportunity Cost

The revenue that is foregone from an alternative use of an asset, such as cash.