A company sets up cost pools for indirect cost allocation. Management sees clear cause-and-effect relationships between the incurrence of costs and the chosen the cost-allocation base. What other common relationships or basis with a cost allocation base might management utilize to allocate costs?
A) R&D expenses
B) benefits -received
C) Capital investment in a related process
D) gross profit proportions

Question

Quizplus · Accepted Answer

Benefits-received is a common basis for allocating costs, as it distributes costs based on the perceived benefit each department or product line receives from the incurred costs.

A Company Sets Up Cost Pools for Indirect Cost Allocation