Gregory Enterprises has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year: Cost Pool Overhead Costs Cost driver Activity level Supervision of direct labor $320,000 Direct laborhours 800,000 Machine maintenance $120,000 Machinehours 960,000 Facility rent $200,000 Square feet of area 100,000 Total overhead costs $640,000 The accounting records show the Mossman Job consumed the following resources: Cost driver Actual level Direct laborhours 200 Machinehours 1,600 Square feet of area 50 Which method of allocation probably best estimates actual overhead costs used? Why? A. Single direct laborhours cost driver because it is best to allocate total costs uniformly to individual jobs. B. Single direct laborhours cost driver because it is easiest to analyze and interpret. C. Three activitycost drivers because they best reflect the relative consumption of resources. D. Three activitycost drivers because product costs can be significantly crosssubsidized.
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Gregory Enterprises has identified three cost pools to allocate overhead costs. The following estima...
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