The true statement concerning the allocation of indirect expenses to departments is:

Question

Quizplus · Accepted Answer

It is generally accepted that when calculating departmental profits, expenses that the departmental manager has no control over (indirect expenses) should be excluded. This is because it allows for a more accurate reflection of the department's performance and allows the manager to focus on areas where they can make a difference. However, option A is not true since there is always some subjectivity in the allocation of indirect costs. Option C is also not true because departmental profit reports should not assume that departments are independent businesses as they are part of a larger organization. Option D is not always true as different accountants may use different bases for allocating overhead costs to departments.

The True Statement Concerning the Allocation of Indirect Expenses to Departments