Answer the following questions using the information below:
Marpole Enterprises has identified three cost pools to allocate overhead costs.The following estimates are provided for the coming year:
The accounting records show the Bossman Job consumed the following resources:

-When selling prices are based on costs assigned using the single cost driver, direct labour hours, then the Bossman job
A)is fairly billed because resources are allocated uniformly to all jobs.
B)is grossly under billed for the job, while other jobs will be unfairly over billed.
C)may increase overall sales as other jobs will be cross-subsidized.
D)will contribute too little to profits, and Gregory Enterprises will not want to accept additional work from the company.
E)will likely seek to do business with competitors.

Question

Answer the following questions using the information below:
Marpole Enterprises has identified three cost pools to allocate overhead costs.The following estimates are provided for the coming year:
  The accounting records show the Bossman Job consumed the following resources:
 
-When selling prices are based on costs assigned using the single cost driver, direct labour hours, then the Bossman job
A)is fairly billed because resources are allocated uniformly to all jobs. 
B)is grossly under billed for the job, while other jobs will be unfairly over billed. 
C)may increase overall sales as other jobs will be cross-subsidized. 
D)will contribute too little to profits, and Gregory Enterprises will not want to accept additional work from the company. 
E)will likely seek to do business with competitors.

Quizplus · Accepted Answer

The Bossman job consumed significantly more resources than the other two jobs, but selling prices were based on the single cost driver of direct labour hours, which does not reflect this difference. Therefore, the Bossman job will be under billed while the other jobs will be over billed, resulting in unfair allocation of costs.

Answer the Following Questions Using the Information Below