A single basis for allocating service department costs to production departments should be used for all service departments.

Question

Quizplus · Accepted Answer

Different service departments may provide different types of support and services, which can vary significantly in nature and method of consumption by the production departments. Therefore, using a single basis for cost allocation may not accurately reflect the actual usage or benefit derived by the production departments from each service department. Different bases for allocation (such as square footage for facilities maintenance or number of employees for human resources) are often used to more accurately allocate costs based on the nature of the services provided.

A Single Basis for Allocating Service Department Costs to Production