For companies in which full allocation is not followed, which of the following is true of corporate sustaining costs?
A) allocated to divisions using cause-and-effect relationship
B) allocated to customers using cause-and-effect relationship
C) added to aggregate operating incomes of the divisions
D) subtracted as a lump-sum amount after aggregating operating incomes of the divisions

Question

Quizplus · Accepted Answer

Corporate sustaining costs are not allocated to divisions in companies that do not follow full allocation. Instead, they are usually subtracted as a lump-sum amount after aggregating operating incomes of the divisions. This is because they are not directly related to any one division or customer, and therefore cannot be accurately allocated.

For Companies in Which Full Allocation Is Not Followed, Which