Final answer:
Support department actual costs are not allocated to production departments because they represent sunk costs which have already been incurred and cannot be recovered, thus are irrelevant to future decisions. Allocation could distort economic analysis by not focusing on variable and marginal costs that are crucial for short-run decision-making.
Step-by-step explanation:
Actual costs of a support department should not be allocated to producing departments because doing so fails to reflect the economic reality of decision-making processes. The costs involved in producing goods or services such as cars, computer software, haircuts, or fast-food meals can vary significantly. Fixed costs, such as the initial outlay for a support department, are considered sunk costs and are not relevant to the future economic decisions of production departments.
Since sunk costs have already been incurred and cannot be recovered, they should be disregarded when considering future production. Allocating these costs to producing departments could distort the economic analysis and lead to suboptimal decisions. Decisions should instead focus on marginal costs and marginal gains, which tend to show diminishing returns. This approach aligns with short-run perspectives, where variable costs and the marginal cost of additional production become more relevant to business strategy and pricing than sunk costs.