Asked by Kristian Johnston on Jul 04, 2024
Verified
The most useful allocation basis for the departmental costs of an advertising campaign for a storewide sale is likely to be:
A) Floor space of each department.
B) Relative number of items each department had on sale.
C) Number of customers to enter each department.
D) An equal amount of cost for each department.
E) Proportion of sales of each department.
Allocation Basis
Allocation basis is a criterion used to distribute costs among different departments, products, or activities based on their use or consumption.
Departmental Costs
Costs that are attributed directly to a specific department within an organization.
- Master the basic principles involved in the allocation of costs in service departments and discover why such allocations are made.
Verified Answer
ZK
Zybrea KnightJul 04, 2024
Final Answer :
E
Explanation :
The proportion of sales of each department is the most appropriate allocation basis for the departmental costs of an advertising campaign for a storewide sale because it directly links the costs to the revenue generated by each department. This method ensures that the departments which benefit the most from the advertising campaign contribute more towards the campaign’s cost. It also incentivizes departments to increase their sales, which ultimately benefits the overall profitability of the company.
Learning Objectives
- Master the basic principles involved in the allocation of costs in service departments and discover why such allocations are made.
Related questions
An Accounting System That Accumulates and Reports Costs Incurred by ...
For Performance Evaluation Purposes, Variable Service Department Costs Should Be ...
Whenever Possible, Service Department Costs Should Be Separated into Fixed ...
Vitro Corporation Has Two Service Departments, Service Department a and ...
Alpha Manufacturing Corporation Has Two Service Departments, Custodial Services and ...