Blitzer Enterprises Has Identified Three Cost Pools and Three Corresponding

question 88

Multiple Choice

Blitzer Enterprises has identified three cost pools and three corresponding cost drivers to allocate overhead costs. The following estimates are provided for the coming year:

The accounting records show the Gergen Job consumed the following resources:

-Which method of allocation probably best estimates actual overhead costs used for Blitzer Enterprises? Why?

• A)Single direct labor-hours cost driver, because it is best to allocate total costs uniformly to individual jobs.
• B)Single direct labor-hours cost driver, because it is easiest to analyze and interpret.
• C)Three activity-cost drivers, because it best reflects the relative consumption of resources.
• D)Three activity-cost drivers,because product costs can be significantly cross-subsidized.

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Definitions:

Regression Analysis

A set of statistical processes for estimating the relationships among variables, often used to predict the value of a dependent variable based on one or more independent variables.

Exponential Smoothing

A time series forecasting method for univariate data that applies diminishing weights to past observations, often used for short-term forecasts.

Random Variation

Unpredictable fluctuations that are inherent in processes or measurement methods and cannot be controlled.

Unpredictable Event

An event that cannot be anticipated or accurately predicted based on past or current information.