Which of the following is true about what the Internal Revenue Service requires for calculating indirect manufacturing costs per unit?
A) a method of which fairly apportions indirect production costs among the various items produced
B) requires that theoretical capacity be used as a means of allocating indirect manufacturing costs
C) requires the use of master-budget capacity utilization
D) requires the use of normal capacity utilization

Question

Quizplus · Accepted Answer

The Internal Revenue Service requires a method which fairly apportions indirect production costs among the various items produced. This is typically done using a cost driver, such as machine hours or direct labor hours. The IRS does not specify the use of theoretical capacity or master-budget capacity utilization, but rather requires the use of a method that is fair and reasonable in allocating indirect manufacturing costs. Normal capacity utilization may be used, but it is not specifically required by the IRS.

Which of the Following Is True About What the Internal