Cost Allocation Is the Process of Assigning Indirect Costs to a Cost

Multiple Choice

Cost allocation is the process of assigning indirect costs to a cost object.The indirect costs are grouped in cost pools and then allocated by a common allocation base to the cost object.The base that is employed to allocate a homogeneous cost pool should:

A) Assign the costs in the pool uniformly to cost objects even if the cost objects use resources in a nonuniform way.
B) Be a nonfinancial measure (e.g., number of setups) because a nonfinancial measure is more objective.
C) Have a cause-and-effect relationship with the cost items in the cost pool.
D) Have a high correlation with the cost items in the cost pool as the sole criterion for selection.
E) None of these answer choices is correct.