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Hello,
Can you please tell me why the answer for P5 Chap 6 LE1 does not account for the Head Office Overheads? In this scenario is has nil impact upon the ranking, but I am confused why in a CPA this has been omitted? Thanks
Ps the notes give this answer as the answer to Chap 7 LE1 by mistake
It is the same old problem with head office overheads. Although they have been allocated here according to revenue, that does not mean that there is any causal effect between revenue of each product and these costs. Administration costs are arguably unrelated to customers and there allocation is always going to be arbitrary.
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