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

Question

Quizplus · Accepted Answer

Allocating indirect expenses to segments can be challenging, as the allocation process can be somewhat arbitrary, and the results may vary widely. This can make it difficult to accurately determine the performance and profitability of each segment, which could have negative implications for decision-making. Therefore, while segment reporting is important, it is essential to carefully consider the methods used for allocating indirect expenses to ensure accuracy and consistency.

The Biggest Problem with Allocating Indirect Expenses to Segments Is