When companies develop cost management systems,which of the following purposes of cost allocation usually dominates?
A) to predict the economic effects of strategic and operational control decisions
B) to provide the desired motivation and to give feedback for performance evaluation
C) to compute income and asset valuations for financial reporting
D) to justify costs or obtain reimbursement

Question

Quizplus · Accepted Answer

Cost allocation for the purpose of computing income and asset valuations for financial reporting usually dominates in cost management systems. This is because financial reporting requires accurate and reliable information about the costs of products or services, and allocating costs helps in determining the profitability of the company and in presenting a true and fair view of its financial position. While other purposes such as predicting economic effects, providing motivation, and justifying costs may also be important, they are secondary to financial reporting requirements.

When Companies Develop Cost Management Systems,which of the Following Purposes