Which of the following would be the case under the stand-alone method of allocating common costs?
A) the individual users of a cost object are ranked in the order of users least responsible for the common cost and then uses this ranking to allocate cost among those users
B) disputes can arise over who is the primary user
C) each party bears a proportionate share of the total costs in relation to their individual stand-alone costs
D) the individual users of a cost object are ranked in the order of users most responsible for the common cost and then uses this ranking to allocate cost among those users

Question

Quizplus · Accepted Answer

Under the stand-alone method, each party bears a proportionate share of the total costs in relation to their individual stand-alone costs. This method assumes that each user would have incurred the same cost if the common cost was not incurred. Therefore, the cost is allocated based on each party's individual cost and not on their level of responsibility for the common cost. Option A and D describe the proportional and incremental allocation methods, respectively. Option B is a potential issue that could arise with any allocation method.

Which of the Following Would Be the Case Under the Stand-Alone