The Biggest Problem with Allocating Indirect Expenses to Segments Is

question 32

Multiple Choice

The biggest problem with allocating indirect expenses to segments is that:

• A)Allocations can be somewhat arbitrary and the results can vary widely
• B)Some departments consume more indirect expenses
• C)Fixed costs are ignored
• D)It is a time-consuming exercise

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Definitions:

Total Profits

The financial gain obtained after subtracting total costs from total revenue over a period.

Marginal Revenue

The boost in income resulting from the sale of one more unit of a product or service.

Market Price

The existing value at which an asset or service might be acquired or disposed of on the open market.

Marginal Revenue

The incremental revenue procured by selling an extra unit of a product or service.