When allocating support department costs, managers must identify cost pools. The choice of cost pools is:
A) Determined by generally accepted accounting principles
B) Not influenced by the allocation base
C) Influenced by the design of the accounting information system
D) Not important, because all support department costs will eventually be allocated anyway

Question

Quizplus · Accepted Answer

The selection of cost pools is influenced by the design of the accounting information system, as it determines how costs will be grouped and allocated. The allocation base is also a factor in determining cost pools, but it is not the only factor. Generally accepted accounting principles do not dictate specific cost pool choices, although they may provide guidelines for appropriate allocation methods. It is important to carefully select cost pools in order to allocate support department costs accurately and fairly, which can have a significant impact on pricing decisions and overall profitability.

When Allocating Support Department Costs, Managers Must Identify Cost Pools