From a decision-making standpoint, the allocated cost should measure the
A)sunk cost of the resource involved.
B)variable costs of the materials purchased.
C)opportunity cost of using a company resource.
D)product cost of the goods produced.

Question

Quizplus · Accepted Answer

Allocated cost should take into consideration the opportunity cost of using a company resource. This means that it should reflect the value of resources that could have been used elsewhere, and therefore represents the cost of using that resource in a particular way. Sunk costs (A) are not relevant to decision-making as they are past costs that cannot be recovered. Variable costs (B) only consider the direct costs of materials and do not reflect the value of using a particular resource. Product cost (D) refers to the total cost incurred in producing a product and is not specific to the allocation of costs.

From a Decision-Making Standpoint, the Allocated Cost Should Measure the