Why Do Managers Assign the Direct Costs of Service Departments

question 31

Multiple Choice

Why do managers assign the direct costs of service departments to customers instead of the producing department?

• A) for ease of calculation
• B) to reduce bookkeeping costs
• C) to prevent cost distortions due to the use of a cost allocation base by the producing department that has little relationship to the cause of customer service costs
• D) because customers are the only cost objects with direct costs

---

Definitions:

Period Costs

Expenses that are not directly tied to production activities and are accounted for as expenses in the period they are incurred, such as selling, general, and administrative expenses.

Conversion Costs

The sum of direct labor and manufacturing overhead costs, representing the total expenses necessary to transform raw materials into finished goods.

Materials Purchased

This refers to the raw materials bought by a company for the production of goods.

Materials Requisitioned

The process of formally requesting materials or supplies, usually from a company's inventory, for production or other uses within the organization.