Final answer:
Inappropriate methods of allocating costs among segments are those that unfairly allocate costs to one segment.
creating a distorted picture of segment profitability and leading to poor decision-making.
Step-by-step explanation:
Methods that unfairly allocate costs to one segment are considered inappropriate for allocating costs among segments. In this case, costs are not allocated based on the actual cost causation or the revenues generated by each segment, but rather unfairly distributed to one segment. These methods can lead to inefficiencies and may distort the true profitability of each segment.
Inappropriate cost allocation methods typically refer to those that unfairly allocate costs to one segment, creating a distorted picture of segment profitability and leading to poor decision-making.
Inappropriate methods of allocating costs among segments are those that distort the true economic picture of the segments. Specifically, option C) Methods that unfairly allocate costs to one segment describe inappropriate cost allocation practices. When costs are allocated unfairly, it can result in one segment subsidizing another, which can lead to incorrect business decisions. For instance, if overhead costs are allocated based just on one segment's revenue, and not on the actual use of resources, it might unfairly burden that segment and make it seem less profitable than it is. In contrast, methods that reflect actual cost causation, consider revenues generated by each segment, or encourage cost-sharing between segments are more equitable and are usually regarded as appropriate cost allocation methods.