The correct method to handle overhead costs in capital budgeting is to:
A) allocate a portion to each project.
B) allocate them to projects with the highest NPVs.
C) ignore all except incremental amounts.
D) ignore them in all cases.

Question

Quizplus · Accepted Answer

Incremental overhead costs are relevant to capital budgeting decisions because they represent additional costs directly attributable to a project. Non-incremental overheads are not considered as they do not change with the decision.

The Correct Method to Handle Overhead Costs in Capital Budgeting