Which of the following statements concerning the allocation of indirect expenses to departments is correct?
A) Accountants have developed methods that have completely removed the subjectivity in allocating indirect costs to departments.
B) A departmental profit calculation should exclude expenses that the departmental manager has no control over.
C) When preparing departmental profit reports, it is best to assume that the departments are independent businesses.
D) Different accountants will normally choose similar bases to allocate overhead costs to departments.

Question

Quizplus · Accepted Answer

It is common practice for departmental profit calculations to exclude indirect expenses that the departmental manager has no control over, as these expenses are not directly attributable to the performance of the department. However, it is important to note that there may still be some subjectivity involved in the allocation of indirect expenses, as different accountants may choose different bases for allocation. Option A is incorrect as there is still some subjectivity involved in indirect cost allocation. Option C is incorrect as departments are not independent businesses but part of a larger organization. Option D is also incorrect as different accountants may use different bases for allocation.

Which of the Following Statements Concerning the Allocation of Indirect