Consider the Following Statements About Dual-Cost Allocation

Multiple Choice

Consider the following statements about dual-cost allocation:
I. Dual-cost allocation prevents a change in the short-run activity of one department from affecting the cost allocated to another department.
II. Dual-cost allocations create an incentive for user department managers to understate their expected long-run service needs.
III. Dual-cost allocations are generally preferred over lump-sum allocations, or those that combine variable and fixed costs together.
Which of the above statements is (are) true?

A) I only.
B) III only.
C) I and II.
D) II and III.
E) I, II, and III.