Assume that AAA Company's Legal 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

Number of service hours provided is the most appropriate cost driver or assignment basis for a centralized service department like the Legal Department, as it reflects the amount of time spent providing services to the various business units. The other options, such as number of purchase orders, number of employees, or number of reports prepared, may not accurately reflect the amount of work done by the Legal Department for each business unit.

Assume That AAA Company's Legal Department Is a Centralized Service