The most effective basis for cost allocation exists when which one of the following can be determined?
A)Cost shifting.
B)Benefit received.
C)Equity share.
D)Cause and effect relationship.
E)Ability to bear.

Question

Quizplus · Accepted Answer

The most effective basis for cost allocation exists when a cause and effect relationship can be determined, meaning that the cost can be directly traced to a specific cost object or activity. This method ensures that costs are allocated in a fair and accurate manner, as each cost object or activity receives only the costs that it directly caused. Benefit received and equity share are also commonly used cost allocation methods, but they may not always accurately reflect the amount of resources used by each cost object or activity. Ability to bear and cost shifting are not typically used as basis for cost allocation.

The Most Effective Basis for Cost Allocation Exists When Which