question archive Fixed Cost Allocation To ensure unbiased cost allocations, fixed costs should be allocated on the basis of estimated long-run use by user-department managers
Fixed Cost Allocation To ensure unbiased cost allocations, fixed costs should be allocated on the basis of estimated long-run use by user-department managers
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Fixed Cost Allocation
To ensure unbiased cost allocations, fixed costs should be allocated on the basis of estimated long-run use by user-department managers." Do you agree or disagree? Why? Please use a minimum of 150 words. thanks!
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Answer:
I disagree with the statement that in order to ensure unbiased cost allocations, fixed costs should be allocated on the basis of estimated long - run use by the user department managers.
If the costs are allocated on the basis of estimated long run use then this implies that the managers of the department can lower their cost allocations deliberately underestimating their long term use.
Though some of the managers do not similarily underestimate their usage, Then there would be no fair cost allocations. The level of fixed cost is effected by long - range planning regarding the overall level of service and expected usage
