Should a company allocate its corporate costs to divisions?

What will be an ideal response?

Answer: Some companies allocate all corporate costs to divisions because corporate costs are incurred to support division activities. Allocating all corporate costs motivates division managers to examine how corporate costs are planned and controlled. Also, companies that want to calculate the full cost of products in order to make some economic decision must allocate corporate costs to indirect-cost pools of divisions.

Some companies do not allocate corporate costs to divisions because these costs are not controllable by division managers. Particularly if performance evaluations are based on these allocations, a company will often not choose to allocate certain corporate costs that are not perceived as being controllable by division management.

Other companies allocate only those corporate costs, such as corporate human resources, that are widely perceived as either causally related to division activities or provide explicit benefits to divisions.