Indirect expenses are allocated to departments based on:

Question

Quizplus · Accepted Answer

Indirect expenses are typically allocated based on some reasonable basis such as percent of sales, square footage, or number of employees. This allocation method allows for a more accurate representation of each department's share of the indirect expenses based on their level of activity. Decisions of stockholders or directives from the board of directors would not necessarily be the best basis for allocating indirect expenses. Generally accepted accounting principles do not provide specific guidelines for how to allocate indirect expenses.

Indirect Expenses Are Allocated to Departments Based On