To allocate corporate costs to divisions,the allocation base used should ________.
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 allocation base used should have the best cause-and-effect relationship with the costs being allocated. This ensures that the cost is fairly distributed amongst the divisions based on the activity or resource usage that drives the cost. Using an output unit-level base or combining administrative and human resource management costs may not necessarily have a direct relationship with the costs being allocated. Allocating fixed costs only may not accurately reflect the actual usage of resources by each division.

To Allocate Corporate Costs to Divisions,the Allocation Base Used Should