Which of the following are true about cost allocation?
A)Cost allocation is a form of transfer pricing for indirect costs
B)Cost allocation is an internal tax on services
C)Cost allocation distorts choices that managers would make otherwise
D)Cost allocation should be imposed when marginal cost exceeds average cost of an internal resource
E)All of the above

Question

Quizplus · Accepted Answer

Cost allocation is a form of transfer pricing for indirect costs, an internal tax on services, and distorts choices that managers would make otherwise. It should be imposed when marginal cost exceeds average cost of an internal resource.

Which of the Following Are True About Cost Allocation