In preparing a responsibility income statement that shows contribution margin and responsibility margin,generally two concepts are involved in allocating costs to the various centers.These concepts are:
A)Whether the costs are variable or fixed and whether they are material in dollar amount.
B)Whether the costs are traceable to the responsibility center and whether the responsibility center is organized as a profit center or an investment center.
C)Whether the costs are variable or fixed and whether they are directly traceable to the responsibility center.
D)Whether the costs are traceable to the responsibility center and whether they are material in dollar amount.

Question

Quizplus · Accepted Answer

The two concepts involved in allocating costs to the various centers are whether the costs are variable or fixed and whether they are directly traceable to the responsibility center. This is because variable costs are directly attributable to the products or services produced in a center, while fixed costs are shared between centers based on some pre-determined allocation basis. Additionally, only costs that are directly traceable to the responsibility center should be allocated to that center, as these costs reflect the activities and operations of that center.

In Preparing a Responsibility Income Statement That Shows Contribution Margin