Which of the following is a reason for allocating service department costs and thereby motivating management?
A)provides for cost recovery
B)provides relevant information in determining corporate-wide profits generated by alternative actions
C)meets regulations in some pricing instances
D)reflects usage of services on a fair and equitable basis

Question

Quizplus · Accepted Answer

Allocating service department costs allows for a fair and equitable reflection of the usage of services by different departments, motivating management to use services efficiently and effectively. Cost recovery (A) and meeting regulations (C) may be benefits of cost allocation, but they are not primary reasons for motivating management. Providing relevant information in determining corporate-wide profits (B) is a benefit of cost allocation, but it is not directly related to motivating management.

Which of the Following Is a Reason for Allocating Service