Question

How many cost pools should a company use when allocating costs to​ divisions, channels and​ customers? ​(Select all that​ apply.)

A.

When allocating costs to​ divisions, channels, and​ customers, companies must construct cost pools that​ are, to the extent​ possible, homogeneous, so that all costs in the cost pool have the same or a similar​ cause-and-effect or​ benefits-received relationship with the​ cost-allocation base.

B.

If each cost category has a​ cause-and-effect or​ benefits-received relationship with a different​ cost-allocation base, the company should maintain separate cost pools for each of these costs. Determining homogeneous cost pools requires judgment and should be revisited on a regular basis.

C.

When allocating corporate costs to​ divisions, a company can combine corporate advertising costs and corporate administration costs into a single cost pool if both cost categories have the same or similar​ cause-and-effect relationship with the same​ cost-allocation base. Determining homogeneous cost pools requires judgment and can not be changed in the future.

D.

If each cost category has a​ cause-and-effect or​ benefits-received relationship with a different​ cost-allocation base, the company should maintain separate cost pools for each of these costs. Determining homogeneous cost pools requires following the accounting standards and should be revisited on a regular basis.

E.

None of the above.

Answer 1