Choice of allocation base should be made based on:
A) the relative size of the base.
B) the base's relation to direct labor.
C) the base's activity.
D) whether the base actually drives the cost being allocated.

Question

Quizplus · Accepted Answer

The allocation base should actually drive the cost being allocated. This ensures that the allocation is accurate and reflects the true cost of the activity or product. The other factors (relative size, relation to direct labor, and activity) may also be considered, but they are secondary to the base's ability to drive the cost being allocated.

Choice of Allocation Base Should Be Made Based On