At a divisional level,when using cost information for pricing decisions:
A)only controllable costs should be included in the decision
B)common costs must be included as pricing needs to cover the entity's total costs
C)only common costs should be included in the decision
D)none of the options is true

Question

Quizplus · Accepted Answer

Pricing decisions at the divisional level should be based on the total costs of the entity, including both controllable and common costs. Common costs are costs that cannot be traced to specific products or services and are shared by multiple divisions or business units. Failure to include common costs in pricing decisions can result in incorrect pricing decisions and distort the profitability of individual divisions. Therefore, common costs must be included in pricing decisions at the divisional level.

At a Divisional Level,when Using Cost Information for Pricing Decisions