Consider the Following Statements About Dual-Cost Allocation

question 41

Multiple Choice

Consider the following statements about dual-cost allocation:
I. Dual-cost allocation prevents a change in the short-run activity of one department from affecting the cost allocated to another department.
II. Dual-cost allocations create an incentive for user department managers to understate their expected long-run service needs.
III. Dual-cost allocations are generally preferred over lump-sum allocations, or those that combine variable and fixed costs together.
Which of the above statements is (are) true?

• A) I only.
• B) III only.
• C) I and II.
• D) II and III.
• E) I, II, and III.

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