When allocating fixed costs from service departments to user departments,a predetermined lump-sum allocation based on the long-range capacity available to the user should be used.

Question

Quizplus · Accepted Answer

Using a predetermined lump-sum allocation based on long-range capacity ensures that the allocation of fixed costs from service departments to user departments reflects the potential or expected use of services over time, rather than fluctuating with short-term variations in usage. This method provides a more stable and predictable basis for allocating fixed costs, facilitating better budgeting and cost control.

When Allocating Fixed Costs from Service Departments to User Departments,a