MI – May 2023 – L1 – SA – Q4 – Cost Classifications

This question asks for the method of allocating costs based on individual usage of a common cost.

Question

The method of allocation of costs to individual users based on their usage of a common cost is known as:
A. Bundled products allocation method
B. Variable cost allocation method
C. Stand-alone cost allocation method
D. Grouped allocation method
E. Incremental cost allocation method

Answer

C. Stand-alone cost allocation method

Explanation:
The stand-alone cost allocation method is used when multiple users share a common resource or cost. Each user is allocated a portion of the total cost based on their individual usage of the resource. This method is commonly applied in situations where multiple departments or products share common facilities or overheads. Therefore, the correct answer is C. Stand-alone cost allocation method, as it aligns with the definition provided in the question.

Tags: Common Costs, Cost Allocation, Stand-Alone Method
Level: Level 1

Topic: Cost Classifications
Series: MAY 2023

Uploader: Theophilus