Within an organization there are departments that support the other areas of the business. These departments provide an internal service to other departments within the same organization.

Why are the costs that are incurred by these departments, the departments that only provide an internal service, allocated to the departments that produce the product that the business ultimately sells? Is it more important to allocate the service department costs if the business offers multiple products or a variety of services?

Explain how the service department costs (again these are the costs that are not directly related to the production of the product) are relevant to the pricing of the product.

Answer rating: 100% (QA)

A service department is a unit within an organization that is not directly involved in the production of products or offering services However a servi... View the full answer