Question

Which cost assignment method would likely assign the cost of heading in a plant that makes beds and dressers when the bed product line is the cost object?

a) driver tracing
b) direct tracing
c) allocation
d) arbitration

Answer 1

The heating cost in a plant producing beds and dressers would be assigned using the allocation method, since it is a facility-wide cost not directly traceable to a single product line.

Step-by-step explanation:

The cost assignment method that would likely assign the cost of heating in a plant that makes beds and dressers when the bed product line is the cost object is c) allocation. Direct tracing and driver tracing are used when costs can be directly tied to a cost object, but heating is typically a facility-wide cost that cannot be easily traced to a single product line. Thus, the heating cost would be allocated to the beds and dressers based on a predetermined overhead rate or cost driver, like square footage or machine hours used by each product line.

The appropriate cost assignment method for assigning the cost of heating in a plant that produces beds and dressers, with the bed product line as the cost object, is "c) allocation." Direct tracing and driver tracing are suitable when costs can be directly linked to a specific cost object. However, heating costs in a plant are often facility-wide and not easily attributable to a single product line. Therefore, the heating cost would be allocated to the beds and dressers based on a predetermined overhead rate or cost driver, such as square footage or machine hours utilized by each product line. This allocation method provides a systematic and rational way to distribute facility-wide costs among different products, ensuring a more accurate representation of the total cost associated with each specific product line.

Answer 2

The cost assignment method used for allocating the cost of heating in a plant to the bed product line is likely to be allocation, which distributes indirect costs according to factors such as floor space or machine hours.

Step-by-step explanation:

The cost assignment method that would likely be used to assign the cost of heating in a plant that makes beds and dressers, with the bed product line as the cost object, is c) allocation.

In cost accounting, allocation is the process of assigning indirect costs to different cost objects, such as products, departments, or other segments of a business. Unlike direct costs which can be traced directly to a cost object, indirect costs require an allocation method since they cannot be traced to a single product or service directly. Since heating is an indirect cost which benefits the whole facility, including both the bed and dresser product lines, it cannot be directly traced to just the bed product line.

It is important to select an appropriate basis for allocation that reflects the way in which the different cost objects use the indirect resource. Common bases for allocation include floor space used by each product line, hours of machine use, or any other measure that can reasonably represent the consumption of indirect resources like heating.