Allocated Indirect Cost Information Can Sometimes Be Low Quality

question 31

Multiple Choice

Allocated indirect cost information can sometimes be low quality. Allocating indirect costs can be improved by:

• A) cross divisional co-operation
• B) using the same cost driver for every cost pool
• C) Neither A or B
• D) Both A and B

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Definitions:

Expected Return

The anticipated return on an investment, based on historical data or probabilistic estimates of future performance.

Nonsystematic Variance

The portion of an investment's variance that is due to factors specific to its issuer and not related to wider market movements.

Market Index

An indicator used to represent the performance of specific sectors or the market as a whole, often compiled from a set of selected stocks.

Active Portfolio

A portfolio that undergoes frequent trading and adjustments by a manager in an attempt to outperform the market or a specific benchmark.