Allocated indirect cost information can sometimes be low quality. Allocating indirect costs can be improved by:
A) cross divisional co-operation
B) using the same cost driver for every cost pool
C) Neither A or B
D) Both A and B

Question

Quizplus · Accepted Answer

Cross-divisional cooperation can improve the allocation of indirect costs by ensuring that the allocation bases used are more reflective of the actual consumption of resources across different parts of the organization. Using the same cost driver for every cost pool (choice B) may not improve the allocation because different costs may be driven by different activities, necessitating the use of multiple cost drivers to accurately allocate costs.

Allocated Indirect Cost Information Can Sometimes Be Low Quality