An Example of a Denominator Reason for Calculating Annual Indirect-Cost

question 118

Multiple Choice

An example of a denominator reason for calculating annual indirect-cost rates includes ________.

• A) Budgeted annual indirect costs divided by actual quantity of cost-allocation base
• B) semi-annual insurance payments in March and September
• C) higher levels of output demanded during the fall months
• D) prepaid rent in January for the months January through June

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Definitions:

Direct Method

A way of allocating service department costs directly to production departments without any consideration for services rendered between service departments.

Operating Activities

Activities that relate directly to the operation of the company, including production, sales, and day-to-day administrative functions.

Net Sales Adjusted

The revenue a company generates from its primary operations after deducting returns, allowances, and discounts.

Direct Method

A way of allocating service department costs directly to production departments without intermediate steps.