The primary difficulty in the allocation of overhead costs to prospective projects is that the:
A)Allocation will reduce the project's NPV
B)Discount rate is unknown
C)Costs may not represent an incremental expense
D)Expenses may have been previously allocated

Question

Quizplus · Accepted Answer

Overhead costs may not represent an incremental expense, meaning that they may not actually increase with the addition of a new project. This can make it difficult to allocate these costs accurately to prospective projects. Additionally, if expenses have already been allocated, it can be challenging to determine how to allocate them further without double-counting. NPV and discount rate are not directly related to the difficulty of allocating overhead costs.

The Primary Difficulty in the Allocation of Overhead Costs to Prospective