Question

A challenge in calculating the total costs and expenses of a department is: Multiple Choice Determining the gross profit ratio. Assigning direct costs to the department. Allocating indirect expenses to the department. Determining the amount of sales of the department. Determining the direct expenses of the department.

Answer 1

Answer: Allocating indirect expenses to the department.

Explanation:

Indirect Expenses are those expenses that the entire business incurred and not just that particular department or segment. This means that it cannot be directly attributed to any one instrument of expense such as products or services.

This is why when it comes to allocating indirect costs which has to be done to maintin proper records, apportioning those costs to each department is challenging because the amount of cost due is not plain or direct.