To guide cost allocation decisions, the cause-and-effect criterion ________.
A) is used less frequently than the other criteria
B) is the primary criterion used in activity-based costing
C) considers fairness as a matter of judgment rather than an operational criterion
D) advocates allocating costs in proportion to the cost object's ability to bear costs allocated to it

Question

Quizplus · Accepted Answer

The cause-and-effect criterion is the primary criterion used in activity-based costing, which is a costing method that identifies the activities that cause costs to be incurred and allocates those costs to cost objects based on their consumption of the activity. This approach helps to more accurately allocate indirect costs to products or services based on the activities they use, which can lead to better decision-making.

To Guide Cost Allocation Decisions, the Cause-And-Effect Criterion ________