Question

Chester Inc. has identified activity centers to which overhead costs are assigned. The cost pool amounts for these centers and their selected activity drivers for the year follow. Which of the following is an appropriate method for allocating overhead costs based on the provided information?

A) Direct labor hours
B) Number of units produced
C) Square footage
D) Fixed percentage of total costs

Answer 1

The appropriate method for allocating overhead costs based on the provided information is B) Number of units produced.

Step-by-step explanation:

The appropriate method for allocating overhead costs based on the provided information is B) Number of units produced.

Allocating overhead costs based on the number of units produced is a common method used in manufacturing industries. This method assumes that the more units produced, the higher the overhead costs incurred. By allocating overhead costs based on the number of units produced, Chester Inc. can distribute the costs more accurately.