The preferred guidelines for allocating service department costs to user departments include ________.
A) combining variable-cost and fixed-cost pools
B) establishing details about cost allocation after providing services
C) using actual costs for allocation of fixed costs and variable costs
D) allocating variable-cost and fixed-cost pools separately

Question

Quizplus · Accepted Answer

Allocating variable-cost and fixed-cost pools separately is the preferred guideline for allocating service department costs to user departments. This is because combining variable-cost and fixed-cost pools can lead to inaccurate cost allocations, and establishing details about cost allocation after providing services can create conflicts between service departments and user departments. Additionally, using actual costs for allocation of fixed costs and variable costs can also result in inaccurate cost allocations as actual costs can fluctuate.

The Preferred Guidelines for Allocating Service Department Costs to User