An organization determines its allocation base depending upon which of the following factors?
A) the purpose served by the cost allocation base
B) the size of the base
C) the number of different items in the base
D) the performance of the denominator activity
E) benchmarking competitor processes

Question

Quizplus · Accepted Answer

The allocation base should be chosen based on the purpose served by it. It should be a factor that has a cause-and-effect relationship with the cost being allocated. The size, number, and performance of the base may be considerations but should not be the only determining factors in selecting an allocation base. Benchmarking competitor processes may be helpful, but it is not a factor in determining allocation bases.

An Organization Determines Its Allocation Base Depending Upon Which of the Following