Assume the Cost Object Is Customers

question 89

Multiple Choice

Assume the cost object is customers.Why should indirect costs associated with customers be allocated to customers instead of producing departments?

• A) The allocation to customers would be based on production-related output measures that are related to the cause of customer-service costs.
• B) The allocation to customers would be based on production-related output measures that are probably not related to the cause of customer-service costs.
• C) The cost-allocation base cannot be determined.
• D) Actual costs would be used instead of budgeted costs.

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Definitions:

Economic Climate

The overall state of the economic environment, characterized by factors such as growth rates, unemployment, inflation, and consumer confidence.

Conditions

Conditions include the specific requirements, terms, or situations that affect or determine the operation of agreements, policies, or actions.

Interest

The cost of borrowing money, typically expressed as an annual percentage of the loan amount.

Borrowed Funds

Money obtained through loans or credits that must be repaid over time, with interest, used for financing various activities or purchasing assets.