A Company Sets Up Cost Pools for Indirect Cost Allocation

question 32

Multiple Choice

A company sets up cost pools for indirect cost allocation. Management sees clear cause-and-effect relationships between the incurrence of costs and the chosen the cost-allocation base. What other common relationships or basis with a cost allocation base might management utilize to allocate costs?

• A) R&D expenses
• B) benefits -received
• C) Capital investment in a related process
• D) gross profit proportions

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Definitions:

Express Authority

Express authority refers to the specific powers given to an agent or entity, explicitly outlined in a contract or agreement.

Apparent Agency

A situation where a principal indirectly indicates that another (the agent) is authorized to act, leading a third party to believe that the agent is acting within their authority.

Contractual Capacity

The legal ability of a person to enter into a binding contract.

Lawful Purpose

Involves activities or objectives that are not illegal or prohibited by law, often a prerequisite in contract law to ensure that the contract’s intent complies with legal standards.