One Reason That Entities Allocate Indirect Costs to Cost Objects

question 38

True/False

One reason that entities allocate indirect costs to cost objects is to encourage the use of central resources.

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Definitions:

Sunk Cost

A cost that has already been incurred and cannot be recovered or refunded, and thus should not influence future financial decisions.

Book Value

Book value is the net value of a company's assets found on its balance sheet, calculated as total assets minus total liabilities and intangible assets.

After-Tax Salvage

The net value of an asset after subtracting taxes associated with its sale or disposal.

Stand-Alone Principle

A method of evaluating the attractiveness of an investment project by analyzing its cash flows as if it were the only project undertaken by the firm.