An allocation method used to control overall spending by a ﬁrm is called:
A) Soft rationing.
B) Hard rationing.
C) Incremental costing.
D) Marginal analysis.
E) Sensitivity analysis.

Question

Quizplus · Accepted Answer

Soft rationing is an allocation method used by a firm to limit its overall spending. Under soft rationing, each department is given a budget cap, but during unforeseen circumstances or urgent situations, more funds can be requested from senior management. This method allows for flexibility in spending while still adhering to an overall budget. Hard rationing, on the other hand, is a more rigid allocation method where departments are given a fixed budget with no possibility of additional funds. Incremental costing, marginal analysis, and sensitivity analysis are methods used for decision-making and not for overall spending control.

An Allocation Method Used to Control Overall Spending by a ﬁRm