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)is a difficult criterion on which to obtain agreement
D)may allocate corporate salaries to divisions based on profits

Question

Quizplus · Accepted Answer

The cause-and-effect criterion is the primary criterion used in activity-based costing, which is a widely accepted method for allocating costs. This criterion links the allocation of costs to the activities that cause them. Therefore, it helps companies to accurately allocate costs to specific activities and products, providing a more accurate measure of their profitability.

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