Allocations of Overhead Should Not Affect a Project's Incremental Cash

question 74

Multiple Choice

Allocations of overhead should not affect a project's incremental cash flows unless the:

• A) project actually increased overhead expenses.
• B) overhead cannot be recovered at the end of the project.
• C) overhead cannot be allocated to other projects.
• D) accountant is required to allocate costs to this project.

---

Definitions:

Guaranteed Residual Value

The minimum future value of an asset as guaranteed by a third party or agreement upon the asset's lease end.

Initial Direct Costs

Initial Direct Costs are expenses directly associated with negotiating and arranging a lease that are not included in the net investment in the lease.

Sale-leaseback

A transaction where an asset is sold and immediately leased back from the new owner, allowing the seller to continue using the asset while freeing up capital.

Depreciation Expense

The systematic allocation of the depreciable amount of an asset over its useful life, representing wear and tear or obsolescence.