Allocation Method for Electric Utilities Expenses
Question
A company plans to create a new allocation rule for electric utilities expenses.
The allocation rule must meet the following requirements: -> Distribute overhead utility expense to each department.
-> Define how and in what proportion the source amounts must be distributed on various destination lines.
You need to configure the allocation rule.
Which allocation method should you use?
Answers
Explanations
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A. B. C. D.D.
https://docs.microsoft.com/en-us/dynamics365/unified-operations/financials/general-ledger/ledger-allocation-rulesTo configure an allocation rule for electric utilities expenses that meets the given requirements of distributing overhead utility expenses to each department and defining how and in what proportion the source amounts must be distributed on various destination lines, you need to select an appropriate allocation method.
There are four options provided in the question:
A. Distribute the source document amount equally B. Fixed weight C. Equally D. Basis.
Let's take a look at each option in more detail:
A. Distribute the source document amount equally: This allocation method will distribute the source document amount equally across all destination lines. It is not an appropriate option for this scenario as it will not allow for different proportions to be defined for different departments.
B. Fixed weight: This allocation method will distribute the source document amount based on pre-defined fixed weights. This could be an appropriate option if the proportions for each department are known and will not change frequently.
C. Equally: This allocation method will distribute the source document amount equally across all destination lines. This is the same as option A and is not an appropriate option for this scenario.
D. Basis: This allocation method allows for the source document amount to be distributed based on a pre-defined basis. This could be an appropriate option if there are different factors that determine the proportion of the electric utilities expenses that each department should be responsible for. For example, the basis could be the square footage of each department's office space, or the number of employees in each department.
Based on the requirements provided, option D (Basis) would be the most appropriate allocation method to use. This would allow for different proportions to be defined for each department based on a pre-defined basis.
