Question Details

Which cost-allocation criterion is appropriate 




1.	To guide cost allocation decisions, the cause-and-effect criterion 
	a.	is used less frequently than the other criteria.
	b.	is the primary criterion used in activity-based costing. 
	c.	is a difficult criterion on which to obtain agreement.
	d.	may allocate corporate salaries to divisions based on profits.

		

2.	To guide cost allocation decisions, the benefits-received criterion
	a.	generally uses the cost driver as the cost allocation base.
	b.	results in subsidizing products that are not profitable.
	c.	is the primarily criterion used in activity-based costing.
	d.	may use an allocation base of division revenues to allocate advertising costs.

		

3.	To guide cost allocation decisions, the fairness or equity criterion
	a.	is the criterion often cited in government contracts.
	b.	is superior when the purpose of cost allocation is for economic decisions.
	c.	is used more frequently than the other criteria.
	d.	is the primary criterion used in activity-based costing.

		

4.	To guide cost allocation decisions, the ability to bear criterion
	a.	is likely to be the most credible to operating personnel.
	b.	allocates costs in proportion to the benefits received. 
	c.	results in subsidizing products that are not profitable.
	d.	is the criterion often cited in government contracts.

		

5.	Which cost-allocation criterion is appropriate when making an economic decision?
	a.	The fairness or equity criterion
	b.	The ability to bear criterion
	c.	The cause-and-effect criterion
	d.	Any of the above criteria are appropriate





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