To identify costs that relate to a specific product,an allocation base should be chosen that
A)does not have a cause-and-effect relationship.
B)has a cause-and-effect relationship.
C)considers variable costs but not fixed costs.
D)considers direct material and direct labor but not manufacturing overhead.

Question

Quizplus · Accepted Answer

An allocation base that has a cause-and-effect relationship with the specific product will provide a more accurate and meaningful allocation of costs. This is because the cost can be more directly traced to the product based on the relationship between the allocation base and the cost incurred. For example, the number of machine hours used in producing a product can be a suitable allocation base for allocating manufacturing overhead costs as there is a cause-and-effect relationship between the machine usage and the overhead costs incurred in producing the product.

To Identify Costs That Relate to a Specific Product,an Allocation