Allocation of costs to various cost objects:
A) may affect managers' performance evaluation.
B) may affect the overall profitability of a company.
C) may affect the apparent profitability of the various products a company makes.
D) Both may affect managers' performance evaluation and may affect the apparent profitability of the various products a company makes are correct.

Question

Quizplus · Accepted Answer

The allocation of costs to various cost objects can affect both managers' performance evaluation and the apparent profitability of the various products a company makes. Performance evaluation is affected because managers are often held accountable for the costs incurred by their departments or teams. If costs are allocated unfairly or incorrectly, this can result in inaccurate performance evaluations. Additionally, if costs are allocated incorrectly, this can make some products appear more profitable than they really are while making others appear less profitable. This can impact decisions related to pricing and product mix, which can ultimately affect the overall profitability of the company.

Allocation of Costs to Various Cost Objects