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