SAP Business One Certification Practice Exam

What determines the method of distribution when expenses are allocated among multiple cost centers?

1. The nature of the expense

2. The frequency of expense occurrence

3. The type of distribution rule applied

4. The size of each department

The correct answer is: The type of distribution rule applied

The method of distribution when allocating expenses among multiple cost centers is determined primarily by the type of distribution rule applied. Distribution rules define how expenses should be divided across various cost centers based on specific criteria, which may include usage, direct benefits, or a predetermined formula. For example, if a company has defined a distribution rule that allocates overhead costs based on labor hours used in each department, then the application of that rule will govern how much each cost center is charged. This ensures that the allocation is consistent, transparent, and aligned with the cost structure of the business. While the nature of the expense, the frequency of its occurrence, and the size of each department can play roles in the overall expense management process, they do not directly determine the allocation method itself. Instead, they may influence the decision-making process when establishing the distribution rules. The correct answer reflects that the allocation process is fundamentally guided by the rules set within the accounting system for equitable expense distribution.