The Direct Method Allocates the Cost of Support Departments Only

question 19

True/False

The direct method allocates the cost of support departments only to operating departments.

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Definitions:

Overhead Expenses

Costs that are not directly associated with the production of goods or services, such as rent, utilities, and administrative expenses.

Operating Profit

The income generated from the primary activities of a business before subtracting any tax and interest expenses.

Retail Selling Price

The price at which goods or services are sold to the final consumer, including any markups applied by retailers.

Profit

The financial gain obtained when the revenue generated from a business activity exceeds the expenses, costs, and taxes associated with it.