Managers can improve the quality of information when allocating support department costs by:
I. Using single-rate allocation
II. Using dual-rate allocation
III. Choosing cost drivers for allocation bases
A) I only
B) II only
C) I and III only
D) II and III only

Question

Quizplus · Accepted Answer

Using dual-rate allocation (II) can improve the quality of information by differentiating between fixed and variable costs of support departments, which allows for a more accurate allocation to the other departments. Choosing cost drivers (III) as allocation bases can also improve the quality of information by identifying the factors that actually drive support department costs. Single-rate allocation (I) does not differentiate between fixed and variable costs and may not fully capture the cost drivers, making it less accurate. Therefore, II and III are better choices for improving the quality of information when allocating support department costs.

Managers Can Improve the Quality of Information When Allocating Support