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Anderson-EOG Inc

question 62

Essay

Anderson-EOG Inc.is evaluating the construction of a gas pipeline to bring natural gas from Western New York state to New York City.The controller argues that every project of the company has to absorb a portion of administrative overhead including corporate headquarters and executive salaries.The Treasurer argues that these costs are irrelevant because they are merely being shifted from part of the company to another.Who is correct?


Definitions:

Decision-Making Needs

Requirements or information essential for making informed choices or judgments in various situations.

Management

The coordination and administration of tasks to achieve a company's objectives, involving planning, organizing, leading, and controlling resources.

Fixed Cost Per Unit

The cost that does not change with the level of production or sales, divided by the number of units produced, to determine the fixed cost allocated to each unit.

Level Of Activity

A measure of the volume of production or work done in a specific period, often used in costing and productivity analysis.

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