Question

True or False: When there is no cause and effect relationship between a cost driver and the cost to be allocated accountants may be forced to make an arbitrary allocation such as assigning an equal amount of cost to each unit of product?

Answer 1

False. When there is no cause and effect relationship between a cost driver and the cost to be allocated, accountants should not make arbitrary allocations.

Step-by-step explanation:

False. When there is no cause and effect relationship between a cost driver and the cost to be allocated, accountants should not make arbitrary allocations. Instead, they should use a systematic method to allocate costs based on a logical and reasonable basis. This ensures that costs are allocated in a way that reflects the actual impact of each cost driver on the cost to be allocated.