5. Direct expenses are costs readily traced to a department because they are incurred for that departments sole benefit.

T or F

6. Advertising expense can be reasonably allocated to departments on the basis of each departments percentage of total sales.

T or F

7. Because there is no standard rule for the best allocation base, allocation bases cannot be used to assign indirect expenses.

T or F

8. A useful measure used to evaluate the performance of an investment center is investment center residual income.

T or F

9. The process of preparing departmental income statements begins with allocating service department expenses to operating departments.

T or F

10. A cost incurred to produce or purchase two or more products at the same time is a(n):

A. Product cost.

B. Incremental cost.

C. Differential cost.

D. Joint cost.

E. Fixed cost.