Use the Following Information for the Next 2 Questions

question 37

Multiple Choice

Use the following information for the next 2 questions.
Flowing Wells Corporation is preparing its annual budget. As part of its analysis of the contribution of individual products to overall profitability, the controller estimates the amount of overhead that should be assigned to the individual product lines. Budgeted inspection costs are $4,800. Additional information is as follows:
-Which of the following is the best cost driver for the activity "distributing products" if the final cost object is the product?

• A) Number of trucks in the fleet of delivery vehicles
• B) Total pounds of product delivered
• C) Direct labor hours used in producing the products
• D) The number of people who work in the distribution activity

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Definitions:

Opening Inventory

The quantity and value of stock available at the start of an accounting period.

Absorption Costing

A method of accounting that encompasses the total manufacturing expenses – encompassing direct materials, direct labor, as well as both variable and fixed overhead costs – within the product's cost.

Variable Costing

An accounting method that only considers variable costs in product pricing and decision making.

Fixed Overhead Expensed

The practice of charging fixed overhead costs to the income statement in the period they are incurred, rather than allocating them to products.