Answer (D) is correct . Ability to bear, measured in terms of the cost object’s profitability, is not an acceptable method because it has a dysfunctional effect on management behavior. It penalizes high performance instead of rewarding profitability.
Answer (A) is incorrect because It is superior to the “ability to bear” criterion for allocating service and administrative costs. See SMA 4B, Allocation of Service and Administrative Costs.
Answer (B) is incorrect because It is superior to the “ability to bear” criterion for allocating service and administrative costs. See SMA 4B, Allocation of Service and Administrative Costs.
Answer (C) is incorrect because It is superior to the “ability to bear” criterion for allocating service and administrative costs. See SMA 4B, Allocation of Service and Administrative Costs.
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