Cost allocation policy
31. Which of the following is a good reason for allocating indirect costs to operating departments?
A. The company could lose
money if the operating departments do not pay for the services they use.
B. To remind managers of the
need to cover indirect costs.
C. To encourage managers to
use more services.
D. To determine the true costs
of operating departments.
32. The cost allocation policy most likely to encourage use of a service is based on
A. budgeted total costs of
the service department
B. actual total costs of the
service department
C. budgeted variable costs for
the service department
D. actual variable costs for
the service department
33. The term “dual rates” refers to
A. allocating costs to
several operating departments
B. allocating fixed costs
based on capacity requirements and variable costs based on use
C. allocating both actual
costs and budgeted costs
D. using the budgeted rate
to allocate some costs, the actual rate to allocate others
34. The WORST method of allocating service department costs is to allocate
A. total actual costs based on
actual use of the service
B. total budgeted costs
based on long-term expected use of the service
C. total budgeted cost based
on actual use of the service
D. none of the above,
because all the above are equally undesirable
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