The Ruling Company assigns plant administration costs to the production departments based on the number of employees. Which of the following would NOT be a good combination of common costs with an activity driver?
A)personnel department costs based on number of employees
B)purchasing department costs based on machine hours
C)cafeteria costs based on meals served
D)warehouse costs based on the value of materials stored

Question

Quizplus · Accepted Answer

Purchasing department costs should be assigned to production departments based on the number of purchase orders or the number of materials purchased, not on machine hours. Machine hours are a better activity driver for assigning manufacturing overhead costs related to the use of machines.

The Ruling Company Assigns Plant Administration Costs to the Production