Which Formula Best Represents the First Step Used to Allocate

question 9

Multiple Choice

Which formula best represents the first step used to allocate an indirect cost to a cost object?

• A) Total cost to be allocated/cost driver
• B) Cost driver/allocation rate
• C) Cost driver/total cost to be allocated
• D) Allocation rate/total cost to be allocated

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Definitions:

Minimum Required Rate

The lowest return rate necessary for an investment to be considered acceptable.

Net Present Value

Net Present Value (NPV) is a calculation used to determine the current value of a series of future cash flows, taking into account a specified rate of return.

Required Rate

Often referred to as the discount rate or required rate of return, it is the minimum return an investor expects to receive for investing in a project or business.

Net Present Value

A method of evaluating the attractiveness of an investment project, by determining the present value of its expected future cash flows minus the initial investment.