The best cost estimate for resources required to handle production runs is developed by using ________ as the denominator for activity cost driver calculations.
A)actual driver quantities of actual production runs
B)estimated driver quantities of estimated production runs
C)available capacity
D)practical capacity

Question

Quizplus · Accepted Answer

The best cost estimate for resources required to handle production runs is developed by using practical capacity as the denominator for activity cost driver calculations. This is because practical capacity represents the maximum capacity that can be achieved without overburdening the resources, and therefore provides a more realistic estimate of the resources that will be required to handle production runs. Using actual or estimated driver quantities may not provide an accurate estimate of the resources required, especially if there are unexpected changes or fluctuations in the production runs. Using available capacity may also not be accurate, as it assumes that all resources are fully utilized, which may not be the case in reality.

The Best Cost Estimate for Resources Required to Handle Production