When Management Is Using Performance Reports to Evaluate the Economic

question 77

Multiple Choice

When management is using performance reports to evaluate the economic performance of a business unit, which of the following costs should be considered?

• A) Any costs that are attributable to the business unit
• B) Costs that are both attributable to the business unit AND are controllable by the business unit manager
• C) Common costs and any costs that are attributable to the business unit
• D) Only costs controllable by the business unit manager

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Definitions:

Installation Costs

Expenses associated with setting up or installing equipment or machinery for its intended use.

Fair Value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Nonmonetary Assets

Assets that cannot be quickly converted into cash, such as property, plant, and equipment, as well as intangible assets.

Asset Surrendered

A situation or transaction where an asset is given up by its owner, which could be due to sale, exchange, forfeiture, or similar circumstances.