Assume the cost object is customers.Why should indirect costs associated with customers be allocated to customers instead of producing departments?
A) The allocation to customers would be based on production-related output measures that are related to the cause of customer-service costs.
B) The allocation to customers would be based on production-related output measures that are probably not related to the cause of customer-service costs.
C) The cost-allocation base cannot be determined.
D) Actual costs would be used instead of budgeted costs.

Question

Quizplus · Accepted Answer

Allocating indirect costs to customers based on production-related output measures that are probably not related to the cause of customer-service costs is incorrect because it does not accurately reflect the source of the costs. The allocation should be based on factors that directly relate to the services provided to customers, ensuring a more accurate distribution of costs.

Assume the Cost Object Is Customers