Question

When the purpose of cost allocation is to provide information for economic decisions or to motivate managers and​ employees, which of the following would be the best​ criteria? A. the benefitsminusreceived and the fairness criteria B. the fairness and the abilityminustominusbear criteria C. the causeminusandminuseffect and the benefitsminusreceived criteria D. the causeminusandminuseffect and the abilityminusto bear criteria

Answer 1

Answer:

The correct answer is C) the cause-‐‑and-‐‑effect and the benefits-‐‑received criteria.

Explanation:

In general, the costs that are collected in the accounts serve three general purposes:

1. Provide cost reports to measure utility and evaluate inventory (income statement and balance sheet).
2. Offer information for the administrative control of the operations and activities of the company (control reports).
3. Provide information to support planning and decision making (analysis and special studies).

Control constitutes the management for the fulfillment of the proposed goals, while cost reduction refers to the effort aimed at achieving a decrease in the levels or magnitude of the costs. The cost of the quality of a product represents the work that requires the identification and administration of the necessary expenditures to maintain an adequate degree of quality, that is, the supervision of compliance with the rules of its design and its specifications.