Indirect Costs Are Usually Allocated Rather Than Traced to Cost

question 63

Multiple Choice

Indirect costs are usually allocated rather than traced to cost objects because

• A)allocation is required by external reporting requirements.
• B)overall accuracy is improved by allocation.
• C)no causal relationship exists between indirect costs and the cost object.
• D)allocation is more convenient than tracing.

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Definitions:

U.S. GDP

The total monetary value of all goods and services produced within the United States' borders in a specific time period, often used as an indicator of economic health.

Investment

Investment entails the allocation of resources, such as capital or time, into a venture with the expectation of generating income or profit over time.

Inflation Rate

The percentage increase in the general price level of goods and services in an economy over a period of time, typically measured annually.

Circular-Flow Diagram

A visual model of the economy that shows how dollars flow through markets among households and firms