Cost allocation provides a service firm a basis for evaluating the:
A)Cost and profitability of its services.
B)Value of its services.
C)Manufacturing costs for the company.
D)Profitability of its customers.

Question

Quizplus · Accepted Answer

Cost allocation allows a service firm to assign costs to different services and determine the profitability of each service. This information can then be used to evaluate overall cost and profitability of the firm's services. Option B is incorrect because cost allocation does not determine the value of services, but rather the amount of resources required to provide them. Option C is also incorrect because cost allocation is not relevant to manufacturing costs. Option D is incorrect because the profitability of customers is determined through customer profitability analysis, which may use cost allocation as one of its tools, but is a separate concept.

Cost Allocation Provides a Service Firm a Basis for Evaluating