Question

If​ indirect-cost rates are calculated​ monthly, distortions might occur because of​ ________. A. property tax payments made in July and December B. routine monthly​ preventive-maintenance costs that benefit future months C. salary hikes at the beginning of the financial year D. rental costs paid monthly

Answer 1

A. . property tax payments made in July and December

If​ indirect-cost rates are calculated​ monthly, distortions might occur property tax payments made in July and December

Step-by-step explanation:

Indirect cost rate is a rate used to uniformly allocate administrative and overhead costs across programs.Either specified in the award document or a NICRA from the cognizant agency.

Indirect cost rate = Estimated total indirect costs / Estimated basis level

The purpose of an indirect cost rate agreement is to publish reimbursement rate(s) negotiated between the federal government and a grantee organization which reflects the indirect costs (e.g facilities and administrative costs) and fringe benefit expenseds incurred by the organization in the conduct of federal programs.

As the property tax payments are madE every six months i-e in JULY and DECEMBER , distortions might occur because this rate is calculated every month.

Answer 2

A. property tax payments made in July and December

Step-by-step explanation:

Indirect costs are defined as those cost that a business incurs during normal operation or production process that are not directly traceable to the product. Indirect costs include rent, taxes, salaries, and maintenance cost.

In this scenario if indirect costs are calculated monthly there will be discrepancy of taxes are paid in July and December. This is because during the first six months of the year tax will not be accounted for, and also from August to November tax will not be recognised. Therefore monthly calculations will not be a true reflection of indirect costs incurred.