A company would use multiple cost-allocation bases ________.
A) if managers believed the benefits exceeded the additional costs of that costing system
B) because there is more than one way to allocate overhead
C) because this is a simpler approach than using one cost allocation base
D) if managers believe that using multiple cost-allocation bases is the only acceptable method

Question

Quizplus · Accepted Answer

A company may use multiple cost-allocation bases if managers believe that the benefits of using those bases exceed the additional costs associated with implementing them. It is a cost-benefit analysis that drives the decision to use multiple cost-allocation bases. This approach allows for a more accurate allocation of costs to the cost objects. Therefore, the answer is A. The statement in option B is not entirely correct since using multiple bases is not because there is more than one way to allocate overhead. Also, option C is incorrect because using multiple cost-allocation bases is not a simpler approach. Lastly, option D is incorrect because there are other acceptable methods for allocating costs.

A Company Would Use Multiple Cost-Allocation Bases ________