When investments in facilities are shared by different subunits in a firm,allocation of cost of these common facilities to sharing units should be determined by:

Question

Quizplus · Accepted Answer

The most equitable and rational method for allocating costs of common facilities is to allocate them in proportion to the relative amount of use of the facilities, or demand for the facilities, by the various subunits. This method considers the actual usage of the facilities and is fairer than allocating based on capacity, GAAP, or some measure of current value. There are no special techniques prescribed by the AICPA for allocating costs of common facilities.

When Investments in Facilities Are Shared by Different Subunits in a Firm,allocation