To identify costs that relate to a specific product,what allocation base should be chosen?
A)One that does not have a cause and effect relationship.
B)One that has a causal relationship.
C)One that considers variable costs but not fixed costs.
D)One that considers direct materials and direct labor but not factory overhead.

Question

Quizplus · Accepted Answer

An allocation base that has a causal relationship with the product is the best choice as it can accurately allocate costs that relate to the specific product. For example, if the product requires more machine hours to produce, then using machine hours as the allocation base can accurately allocate overhead costs to that specific product.

To Identify Costs That Relate to a Specific Product,what Allocation