Answer (B) is correct . Cost allocation is the process of assigning and reassigning costs to cost objects. It is used for those costs that cannot be directly associated with a specific cost object. Cost allocation is often used for purposes of measuring income and assets for external reporting purposes. Cost allocation is less meaningful for internal purposes because responsibility accounting systems emphasize controllability, a process often ignored in cost allocation.
Answer (A) is incorrect because A revenue center is evaluated on the basis of revenue generated, without regard to costs.
Answer (C) is incorrect because Cost allocation is not necessary for cash budgeting and controlling expenditures.
Answer (D) is incorrect because Allocations are not needed for variable costing, which concerns direct, not indirect, costs.
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