The Zink Company assigns plant administration costs to the production departments based on the number of employees.Which of the following would be a good combination of common costs with an activity driver?

Question

Quizplus · Accepted Answer

Warehouse costs based on the value of materials stored is a good combination because the value of materials stored in the warehouse can be used as an activity driver to allocate warehouse costs to the production departments. The higher the value of materials stored, the more resources are being used in the warehouse, therefore, it is a good indicator to allocate the common costs associated with the warehouse. Option A and B are not appropriate because personnel and purchasing department costs are not directly related to machine hours. Option C is not appropriate because cafeteria costs do not have a direct relationship with direct labor hours.

The Zink Company Assigns Plant Administration Costs to the Production