SAP Business One Certification Practice Exam

When distributing rent expenses across departments, which type of distribution rule is typically used?

1. Direct

2. Indirect

3. Equal

4. Proportional

The correct answer is: Indirect

When distributing rent expenses across departments, the indirect distribution rule is typically used because it allows for allocation based on factors that may indirectly influence the consumption of that expense. This method is particularly suited for allocating costs that cannot be directly assigned to one department. For instance, rent expenses may be allocated based on the size of each department's space relative to the total rented space or on a percentage basis that considers factors such as department usage or employee headcount, among other things. This ensures a more equitable distribution of costs in accordance with how each department benefits from the rented space. In contrast, direct distribution rules are generally used when expenses can be clearly attributed to a specific department without further allocation needed. The equal method distributes costs equally, which may not accurately reflect the actual use of the resource among different departments. The proportional method can also be an option, but it specifically requires a baseline for scaling costs, which means its application must consider factors that directly affect the expense assignment. Thus, the indirect method stands out as the most commonly used rule for this type of expense distribution.