Question

question content areawhat is one of the potential disadvantages of not allocating support department costs to production departments? a.total costs would not be accumulated. b.managers will use a support service at a more efficient level. c.managers may tend to overconsume these services. d.this would encourage managers to monitor support department performance.

Answer 1

Cost allocation can occasionally result in favoritism, with one department receiving significantly more if cost managers care for it more.

This kind of bias can also lead to a number of related problems, like rivalries, competition for resources, and the expansion of departmental requirements and ideas.

What justifies the allocation of support costs?

The management can use the important data that cost allocation provides about how costs are used to make decisions. It helps determine whether the departments or products are profitable enough to justify the costs allocated by displaying the cost objects that account for the majority of the costs.

Which procedure is used to allocate costs to the support department?

There are three ways to divide costs for the support department: the direct, the reciprocal, and the step-down. The assumptions regarding how services provided by one support department are distributed to other support departments are the primary distinctions between the methods.

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