Indirect Expenses Are Allocated to Departments Based On

question 98

Multiple Choice

Indirect expenses are allocated to departments based on:

• A) decisions of the stockholders.
• B) directives from customers.
• C) some reasonable basis, such as percent of sales.
• D) generally accepted accounting principles.

---

Definitions:

Manufacturing Overhead

All indirect costs associated with the production process, including costs of materials, utilities, and maintenance that are not directly associated with the manufacturing of a specific product.

Activity-based Costing

An accounting approach that assigns costs to products or services based on the resources they consume, aiming for more accurate cost allocation.

Machining

The process of removing material from a workpiece using power-driven machine tools to shape it into a desired form.

Activity-based Costing

Activity-based costing involves identifying and assigning costs to overhead activities and then assigning those costs to products or services based on their consumption of those activities, offering detailed insights into cost drivers.