Gatlin Company Has Several Service Departments That Provide Services for Each

question 23

Multiple Choice

Gatlin Company has several service departments that provide services for each other as well as for operating departments within the company.The method that would be least accurate in allocating the company's service department costs would be:

• A)by the step-down method.
• B)by the direct method.
• C)by cost behavior.
• D)by the reciprocal method.

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Definitions:

Riskless Profits

Profits made from trading or investing that are deemed to have no risk; often considered unrealistic in practical financial markets.

Capital Asset Pricing Model

A model that describes the relationship between systematic risk and expected return for assets, particularly stocks.

Expected Rate

The anticipated return on an investment over a certain period.

Beta

A measure of a stock's volatility in relation to the overall market, where a beta greater than 1 indicates greater volatility than the market.