Which of the Following Statements Is True Regarding the Allocation

question 25

Multiple Choice

Which of the following statements is true regarding the allocation of a company's indirect fixed costs?

• A) Indirect fixed costs should always be traced to a particular segment.
• B) If the indirect fixed cost would go away should a particular segment be eliminated, then the indirect fixed cost should be traced to that particular segment.
• C) Indirect fixed costs should never be allocated to a particular segment.
• D) Indirect fixed costs should not benefit more than one particular segment.

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Definitions:

Net Operating Income

The income a company makes from its regular business activities, not including costs related to interest and taxes.

Net Operating Income

A measure of a company's profitability that calculates how much revenue exceeds operating expenses, not including taxes and interest expenses.

Average Operating Assets

A financial metric calculated by averaging the beginning and ending values of assets employed in generating operating income over a certain period.

Minimum Required Rate

The lowest rate of return considered acceptable by investors for investing in a financial instrument, based on risk and alternative opportunities.