Question

A company is considering the use of a single-stage cost allocation process under what conditions would this choice be justified?

A) The company has no service departments but many production departments.
B) The company produces a wide selection of differing products.
C) The company has many service departments but only one production department.
D) The company produces a few products with similar characteristics in a few departments.

Answer 1

A single-stage cost allocation process is justified when a company produces a few products with similar characteristics in a few departments.

Step-by-step explanation:

A single-stage cost allocation process would be justified when a company produces a few products with similar characteristics in a few departments. This is because the cost allocation process becomes relatively simple and straightforward when there are fewer products and departments to consider. For example, if a company only produces three products in two departments, it is easier to allocate the costs to those specific products and departments rather than dealing with a wide selection of differing products or multiple service departments.