The Controller of Alaska Company Is in Charge of Installing

question 109

Essay

The controller of Alaska Company is in charge of installing a new costing system which includes the allocation of indirect manufacturing costs to the producing departments. After studying the situation, he found that there were three cost drivers that could be used to assign the indirect costs, each with its own merits. After computing the allocations for the departments on a sample month, he found that each cost driver favored (i.e., assigned less costs to) a different department. Machine hours favored Department X, direct manufacturing labor hours favored Department Y, and number of processing steps performed favored Department Z.
Required:
What additional factors must the controller consider before deciding on an allocation base for the indirect manufacturing cost assignment to the departments?

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Definitions:

Disadvantaged

Referring to individuals or groups lacking in resources, opportunities, and access to services compared to others in society.

Medical Durable Power of Attorney

A legal document that authorizes a designated person to make healthcare decisions on behalf of someone who is incapacitated or unable to make their own medical choices.

Living Will

A legal document specifying a person's wishes regarding medical treatment in circumstances in which they are no longer able to express informed consent.

Decisions

The process of making choices or judgments among two or more alternatives, often considering various factors or outcomes.