Multiple choice Corporate cost allocation

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Quick exercises – Corporate Cost Allocation 1 ACCOUNTING, FINANCE AND CONTROL 2018-2019 QUICK EXERCISES – CORPORATE COST ALLOCATION For each question, select the correct answer (only 1 answer is correct) 1. Allocating Corporate Costs to Business Units:  Does not impact the EBIT of those Business Units;  Grants always to respect the specific responsibility principle;  Can be based on a proportional approach;  None of the above. 2. Which one of the followings CANNOT be considered an example of Corporate Cost?  Legal Offices costs;  Research & Development costs;  Direct Raw Material costs;  Administrative Expenses. 3. Which one of the following sentences about “ Complete Allocation” of Corporate Costs is TRUE?  Complete Allocation is based on a proportional division: therefore, it grants to respect the specific responsibility principle;  Complete allocation is usually cheaper and easier to be performed than Partial or No allocation;  It can make explicit that corporate resources impact on Business Units performances;  None of the above. 4. The issue of Corporate Cost Allocation:  Arises when there are resources used at Corporate Level, but managed by Business Units;  Arises when there are resources used by Business Units, but managed at Corporate Level;  Is not related to Business Unit performances;  Can be faced by understanding prices of intra-company exchanges. Quick exercises – Corporate Cost Allocation 2 5. For allocating actual costs proportionally to an allocation basis, you should know:  Just the overall usage of the resource and the overall cost;  Just the overall capacity of the resource and the overall cost;  Just the usage of the resource by each unit and the overall cost of the resource;  Just the overall usage and the estimated cost for…