Indirect expenses are allocated to departments based on:

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Quizplus · Accepted Answer

Indirect expenses, also known as overhead costs, are allocated to departments based on a reasonable and logical basis, such as square footage, number of employees, machine hours or direct labor hours. This helps to distribute costs fairly and accurately among departments based on their level of usage or consumption of such resources. Decisions of stockholders or directives from the board of directors are not typically relevant to the allocation of indirect expenses, nor do they adhere to Generally Accepted Accounting Principles (GAAP).

Indirect Expenses Are Allocated to Departments Based On