Question

Consider the following statements about support department cost allocations.

i. In a modern manufacturing environment, it is not necessary to allocate support department costs.

ii. Support department cost allocations continue to be necessary when a highly automated system is in use.

iii. In a flexible manufacturing system, the need to allocate costs diminishes because more costs have become traceable to the product.

Which statement/s is/are true?

Select one:

a. i

b. i, ii and iii

c. i and ii

d. ii and iii

Answer 1

Answer:-

d.ii and iii.

Explanation:-

Service Departments are the ones which support the operational department for manufacturing the product.It is necessary to allocate Service Department Costs to derieve at accurate and fair costs and profits.In case of highly automated systems, support costs are directly related to the manufacturing processes and hence allocation of Support Departmental Costs becomes necessary.Flexible Manufacturing System is the type of manufacturing in which the machines can be configured to produce different type and quantity of product according to customer's needs.Since more costs become traceable to the product in Flexible Manufacturing Systems, the need to allocate costs diminishes.