Unformatted text preview: of the necessary data.
A decision to use the more accurate basis depends largely on senior management’s planned uses for the information. In some instances, the information can enhance profitability assessments; in others, it may improve pricing
decisions; in still others, it may influence the motivation of people responsible for managing the cost centers. These
sorts of considerations will determine whether senior management wishes to use more accurate (and generally
more costly) allocation bases.
In summary, the more precise the distribution and allocation processes, the more accurately one captures true
resource consumption. Exact measurement of resource consumption can be a time-consuming and complicated
process, however, and less accurate approaches occasionally are adopted in response to time, staffing, and technical
constraints. For example, a typical basis of allocation for some service centers is square feet of floor space. Computation of square footage for all cost centers is...
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- Spring '14
- ........., Boston University School of Management, Crimson Press Curriculum Center, Professor of Accounting and Control