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.

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Definitions:

Output

The total quantity of goods or services produced by an individual, firm, or country over a specified period.

Government Deregulation

The process of reducing or eliminating government rules controlling how businesses can operate, often to encourage more competition and innovation.

Economies of Scale

Enterprises gain cost benefits from their scale of operation, which typically results in the cost per unit of output decreasing as the scale increases.

Economic Profit

The total revenue of a business minus its explicit and implicit costs.