Variable and fixed costs from service departments should be allocated separately to user departments.

Question

Quizplus · Accepted Answer

Allocating variable and fixed costs separately to user departments allows for more accurate cost allocation and better decision-making by managers. Variable costs are directly related to the level of activity in each user department and should be allocated based on usage, while fixed costs are not affected by activity levels and should be allocated based on capacity or some other allocation basis. Separating these costs ensures that each department is responsible only for the costs that it generates and enables managers to better control and manage their department's costs.

Variable and Fixed Costs from Service Departments Should Be Allocated