Assume that AAA Company's Payroll and Human Resources Department is a centralized service department serving all the various business units of the company. If AAA wished to assign the costs of the department to the company's various business units, which of the following would be the MOST appropriate cost driver or assignment basis?

Question

Quizplus · Accepted Answer

The most appropriate cost driver or assignment basis in this scenario would be the number of employees because the Payroll and Human Resources Department's primary responsibility is to manage and maintain employment-related matters such as salaries, benefits, hiring, and training. Therefore, the department's costs are directly proportional to the number of employees in each business unit, and assigning costs based on the number of employees would ensure that each unit incurs a fair share of the department's expenses. Other cost drivers, such as purchase orders, reports, or service hours, may not accurately reflect the department's workload and may result in an unequal distribution of costs among business units.

Assume That AAA Company's Payroll and Human Resources Department Is