Question

Financial Planning Partners​ Inc., employs 12 fulltime CPAs and 10 paraprofessionals. Direct and indirect costs are applied on a professional laborhour basis that includes both attorney and paraprofessional hours. Following is information for​ 2018: Budget Actual Indirect costs Annual salary of each attorney Annual salary of each paraprofessional Total professional laborhours dlh dlh When using a normal costing​ system, yearend accounting records will show that indirect costs are​ ________. A. perfectly allocated B. within budget C. overallocated D. underallocated Click to select your answer.

Answer 1

The correct answer is C) overallocated.

When using a normal costing​ system, yearend accounting records will show that indirect costs are​ overallocated.

This means that in any business, overallocation is when resources are not correctly allocated to the departments or activities needed. SO when planning a project, overallocation can be the mistake of assig more resources to one side of the project, department, area, or unit. This implies the idea that other departments or activities are gings to lack the proper funding to do their work. Of course, overallocation can affect the results of the project or the time is needed to get it done.