An organization that does not require precise measurements of the use of services probably would allocate its service center costs by:
A. using some form of the step method.
B. applying the direct method.
C. each revenue center's ability to absorb the cost.
D. the actual usage of the service by the revenue c
To determine the most appropriate method for allocating service center costs for an organization that does not require precise measurements, you need to consider the characteristics of each option:
A. The step method: Instead of allocating costs based on actual usage, the step method allocates costs based on predetermined steps or criteria. This method may be useful if the organization wants to allocate costs in a more general, simplified manner.
B. The direct method: The direct method directly assigns the service center costs to the specific revenue centers that benefit from the services. It does not consider the actual usage or specific criteria for allocation.
C. Each revenue center's ability to absorb cost: This method allocates costs based on each revenue center's ability to absorb the costs, regardless of the actual usage of services. This approach takes into account the financial capacity of each revenue center rather than the specific service usage.
D. The actual usage of the service by the revenue center: This method allocates costs based on the actual usage of services by each revenue center. It directly links the costs to the actual consumption of services, providing a more accurate allocation based on usage.
Considering the organization does not require precise measurements of service usage, the most suitable option would be:
C. Each revenue center's ability to absorb the cost: This method allows for a more broad and flexible allocation of costs based on the financial capacity of each revenue center. It does not require precise measurements of service usage and can be adjusted accordingly.
It's important to note that the best approach for cost allocation depends on the organization's specific requirements, objectives, and available data. Consider consulting with relevant stakeholders or professionals for a more accurate evaluation of the most appropriate method in your organization's context.