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?
- A. Distribute the source document amount equally
- B. Fixed weight
- C. Equally
- D. Basis Correct
Explanation
Basis is the variable method that spreads the source amount across the destination lines in proportion to actual ledger balances selected by separate allocation basis rules, for example each department's share of a measure. Equally splits the amount into identical parts and cannot reflect different proportions. Fixed weight (and fixed percentage) uses weights typed directly on the rule rather than values derived from ledger balances, so it does not define the proportion from the underlying data.
