Answer (A) is correct . Responsibility costs are designed to motivate managers of a responsibility center to act in the best interest of the organization. Therefore, the costs should be allocated only if they (1) can be influenced by the actions of the center’s management, (2) are helpful in measuring support given to the responsibility center, (3) improve comparability, or (4) are used in product pricing. Whether the costs are from staff, line, or other services has no bearing on whether they should be allocated. Furthermore, some organizations encourage the use of services such as consulting or internal audit by not charging their costs to responsibility centers. See SMA 4B, Allocation of Service and Administrative Cost.
Answer (B) is incorrect because It provides justification for allocating cost to responsibility centers.
Answer (C) is incorrect because It provides justification for allocating cost to responsibility centers.
Answer (D) is incorrect because It provides justification for allocating cost to responsibility centers.
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