Why do managers assign the direct costs of service departments to customers instead of the producing department?
A) for ease of calculation
B) to reduce bookkeeping costs
C) to prevent cost distortions due to the use of a cost allocation base by the producing department that has little relationship to the cause of customer service costs
D) because customers are the only cost objects with direct costs

Question

Quizplus · Accepted Answer

Assigning the direct costs of service departments to customers prevents cost distortions due to the use of a cost allocation base by the producing department that has little relationship to the cause of customer service costs. This method ensures that the customers who actually receive the services are the ones bearing the costs associated with those services, rather than potentially penalizing a particular producing department for using a service more frequently than others.

Why Do Managers Assign the Direct Costs of Service Departments