Consider the Following Statements Regarding Cost Allocation

question 57

Multiple Choice

Consider the following statements regarding cost allocation.
i. Allocation of budgeted costs is preferred to actual cost as this minimises the possibility that the actions of one user department will affect the costs allocated to another user department.
ii. Allocation of standard budgeted rates is preferred, so the user department does not have to bear the inefficiencies of support departments.
iii. Knowing the standard rates in advance allows the user departments to plan their activities with greater certainty.
Which statement/s is/are true?

• A) i
• B) i and ii
• C) i, ii and iii
• D) ii and iii

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Definitions:

Control and Coordination

The process of managing and integrating activities to ensure that organizational goals are efficiently achieved.

Network Complexity

The intricacy and interconnectedness of components within a network, reflecting its diversity, number of nodes, connections, and the degree of their interactions.

Outsourced Activities

Tasks or operations handed over to external entities or companies to capitalize on efficiencies or specialized skills not available internally.

Lack of Loyalty

Refers to the absence of allegiance, commitment, or fidelity in relationships, such as between an employee and employer.