The underlying principle of allocating indirect operating expenses to departments is to assign to each department an amount of expense proportional to the revenues of that department.

Question

Quizplus · Accepted Answer

The underlying principle is to allocate indirect operating expenses based on the cause-and-effect relationship, benefit received, fairness, or ability to bear, rather than strictly on revenue proportionality.

The Underlying Principle of Allocating Indirect Operating Expenses to Departments