Which of the Following Is an Appropriate Cost Driver for Allocating

question 17

Multiple Choice

Which of the following is an appropriate cost driver for allocating indirect costs to a human resources department in a service company?

• A) Number of employees
• B) Number of customers
• C) Square footage of office space
• D) Both number of employees and square footage of office space are correct.

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Definitions:

Reversing Entries

Journal entries usually made at the beginning of an accounting period to reverse or cancel out adjusting entries from the end of the previous period.

Allowance Method

An accounting technique used to anticipate and adjust for potential future losses from uncollectible accounts receivable.

Uncollectible Accounts

Accounts receivable that are recognized as not being collectible, leading to a write-off as a bad debt expense.

Bad Debts Expense

Bad debts expense is an estimate of the accounts receivable that a company does not expect to collect, treated as an expense on the income statement.