Companies often refine their cost allocation systems to minimize the amount of cost distortion caused by the simpler cost allocation systems.

Question

Quizplus · Accepted Answer

This is true. Companies want to allocate costs as accurately as possible to the products, services, or departments that consume them in order to make better decisions about pricing, resource allocation, and product offerings. Cost distortion occurs when costs are allocated improperly, which can lead to poor decision-making and inaccurate profitability analyses. As a result, companies often refine their cost allocation systems to reduce cost distortion and improve the accuracy of their cost information.

Companies Often Refine Their Cost Allocation Systems to Minimize the Amount