Under the dual-rate cost-allocation method, when fixed costs are allocated based on actual usage then ________.
A) user-division managers are motivated to make accurate long-run usage forecasts
B) user-division managers can better plan for the short-run and for the long-run
C) the costs of unused capacity are highlighted
D) variations in one division's usage affect another division's allocation

Question

Quizplus · Accepted Answer

When fixed costs are allocated based on actual usage, variations in one division's usage can affect the allocation of costs to other divisions, as the total fixed costs are distributed based on the actual usage proportions.

Under the Dual-Rate Cost-Allocation Method, When Fixed Costs Are Allocated