The biggest problem with allocating indirect expenses to segments is that:
A) allocations can be somewhat arbitrary and the results can vary widely.
B) some departments consume more indirect expenses.
C) fixed costs are ignored.
D) it is a time-consuming exercise.

Question

Quizplus · Accepted Answer

Allocating indirect expenses to segments can be difficult because the allocations can be somewhat arbitrary and the results can vary widely. Different methods of allocation can be used, and the choice of method can affect the results. This can make it difficult to determine which departments or segments are truly more profitable or cost-effective, and can make it challenging to make informed management decisions based on the resulting data.

The Biggest Problem with Allocating Indirect Expenses to Segments Is