Nationwide Travel is a travel agency with 20 offices located throughout Australia. Bob Sharp, the managing director, recently attended an accounting seminar on cost allocation. During a coffee break, he was overheard making the following comment to Anna Mangano, a local manufacturer: 'Allocating service department costs to income-producing departments is necessary only in service organisations. Your company would be wasting a lot of resources to conduct such an exercise.'
Required:
As a management accountant for the manufacturing entity, how would you respond to the comments made by Bob Sharp?