To allocate corporate costs to divisions, the ideal situation would be for the allocation base to ________.
A) be an output unit-level base
B) have the best cause-and-effect relationship with the costs
C) combine administrative costs and human resource management costs
D) allocate the fixed costs only

Question

Quizplus · Accepted Answer

The ideal allocation base should have the best cause-and-effect relationship with the costs. This ensures that the division responsible for generating the cost incurs the associated charge. Allocating fixed costs only or combining administrative costs and human resource management costs may lead to inaccurate allocations. An output unit-level base may not be appropriate if the divisions have different product lines or use different resources to produce their outputs.

To Allocate Corporate Costs to Divisions, the Ideal Situation Would