Question

Which of the following statements is true? a.Support department cost allocations should be incorporated into the general accounting system but do not need to be incorporated into a product costing system. b.Support department cost allocations can be ignored for more accurate product costing. c.Support department cost allocations should be rolled into the general and administrative costs associated with the corporate office expenses. d.Support department cost allocations should be incorporated into a product costing system.

Answer 1

Answer: D. Support department cost allocations should be incorporated into a product costing system.

Explanation:Support departments provide essential support services for producing departments and by this the support department costs are part of the total product costs and must be assigned to the products through cost allocation from support departments to producing departments.

All manufacturing costs, direct and indirect must be assigned to the products produced to meet GAAP requirements.

The cost allocation method to use can be: a single charging rate, dual charging rate or allocation of costs.