One reason why capacity costs should be allocated among products is that:
A) It allows management to estimate changes in capacity costs over the long run
B) It assists in making decisions specifically for the short-term
C) It follows the rules for utilizing variable costing
D) It separates product costs from period costs

Question

Quizplus · Accepted Answer

Allocating capacity costs among products allows management to estimate changes in capacity costs over the long run, which is useful for long-term planning and decision making. This information can help managers determine if they need to increase capacity, reduce capacity, or change their product mix to optimize capacity utilization. It also helps to ensure that each product bears a fair share of the capacity costs, which can help in pricing decisions and profitability analysis.

One Reason Why Capacity Costs Should Be Allocated Among Products