Answer (A) is correct . The difficulty with common costs is that they are indirect costs whose allocation may be arbitrary. A direct cause-and-effect relationship between a common cost and the actions of the cost object to which it is allocated is desirable. Such a relationship promotes acceptance of the allocation by managers who perceive the fairness of the procedure, but identification of cause and effect may not be feasible.
Answer (B) is incorrect because Allocation using an ability-to-bear criterion punishes successful managers and rewards underachievers.
Answer (C) is incorrect because Fairness is an objective rather than a criterion. Moreover, fairness may be interpreted differently by different managers.
Answer (D) is incorrect because The benefits-received criterion is preferable when a cause-effect relationship cannot be feasibly identified.
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