Allocations of corporate headquarters expenses to divisions used in return on investment calculations should be limited to the cost of those actual services provided by central headquarters,which the divisions otherwise would have to provide for themselves.

Question

Quizplus · Accepted Answer

Allocating only the cost of actual services provided by central headquarters is a more accurate reflection of the division's true profitability and performance. It avoids overburdening the division with unnecessary expenses and ensures fair comparisons between divisions.

Allocations of Corporate Headquarters Expenses to Divisions Used in Return