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Author Question: Gregory Enterprises has identified three cost pools to allocate overhead costs. The following ... (Read 92 times)

PhilipSeeMore

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on: Mar 6, 2021
Gregory Enterprises has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year:

Cost PoolOverhead CostsCost driverActivity level
Supervision of direct labor$320,000Direct labor-hours800,000
Machine maintenance$120,000Machine-hours960,000
Facility rent$200,000Square feet of area100,000
Total overhead costs$640,000

The accounting records show the Mossman Job consumed the following resources:

Cost driverActual level
Direct labor-hours200
Machine-hours1,600
Square feet of area50

Which method of allocation probably best estimates actual overhead costs used? Why?
◦ Single direct labor-hours cost driver because it is best to allocate total costs uniformly to individual jobs.
◦ Single direct labor-hours cost driver because it is easiest to analyze and interpret.
◦ Three activity-cost drivers because they best reflect the relative consumption of resources.
◦ Three activity-cost drivers because product costs can be significantly cross-subsidized.
Horngren's Cost Accounting: A Managerial Emphasis ¦ Datar, Rajan ¦ 16th Edition
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Marked as best answer by PhilipSeeMore on Mar 6, 2021

Sierray

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Reply #1 on: Mar 6, 2021
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PhilipSeeMore

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Reply 2 on: Mar 6, 2021
Wow, this really help

ttt030911

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Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

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