Question 1

Which of the following statements about Corporate Costs is correct? (Barros: 2) Corporate Costs can be distinguished into three main groups: direct costs, indirect costs, and period costs. Corporate Costs can be allocated to Business Units using the following approaches: a market-based approach or a cost-based approach; the cost-based approach can rely on either actual or standard costs. A partial corporate cost allocation based on proportional allocation drivers allows to fairly allocate costs related to sure capacity among the Business Units. A partial corporate cost allocation based on fees should be preferred in the case of costs related to spare capacity Company Essex is evaluating the possibility of changing its inventory policy (shifting from LIFO policy to FIFO policy) as it is planning to move to international standards. Company Essex is preparing the operating budget for the year (X +1) and wants to understand possible differences in the key figures of the operating budgets due to the adoption of the FIFO logic versus LIFO logic for evaluating its inventories (starting from year X+1). Company Essex does not keep inventories of work in progress and final products, but only of raw materials. Given this premise, which of the following sentences is correct? (Bannos: 2) Michela Arnabola The adoption of LIFO or FIFO logic is NOT a relevant piece of information for drafting the operating budgets. 3 49