The allocation of general overhead control costs to operating departments can be least justified in determining
A)income of a product or functional unit.
B)costs for making management's decisions.
C)costs of products sold.
D)costs for government's "cost-plus" contracts.

Question

Quizplus · Accepted Answer

General overhead costs are typically allocated to assist in pricing, profitability analysis, and external reporting. However, for internal management decisions, such as whether to add or drop a product line, the focus should be on relevant costs—those that will change as a result of the decision. Allocating fixed overhead costs can obscure the incremental costs and benefits of such decisions, making it less justifiable compared to the other options listed.

The Allocation of General Overhead Control Costs to Operating Departments