Fixed cost allocation rates should be determined using
A)past production capacity.
B)short-term average usage.
C)short-term expected usage.
D)long-term expected usage.
E)actual usage.

Question

Quizplus · Accepted Answer

Fixed cost allocation rates should be based on long-term expected usage since fixed costs are typically incurred over a longer period of time and should not be allocated based on short-term fluctuations. Past production capacity, short-term average usage, and actual usage may not reflect future usage patterns and may result in inaccurate cost allocations. Short-term expected usage may be more accurate than the other options, but long-term usage provides a more stable basis for allocation rates.

Fixed Cost Allocation Rates Should Be Determined Using