Eaton Company Uses Activity-Based Costing to Allocate Overhead Costs to Products.When

question 17

Multiple Choice

Eaton Company uses activity-based costing to allocate overhead costs to products.When figuring the cost of ordering raw materials,which of the following is likely the best cost driver for this activity?

• A)Number of orders placed.
• B)Weight of the parts ordered.
• C)Square footage of the purchasing department area.
• D)Direct labor cost.
• E)None of the answer choices is correct.

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Definitions:

Direct Labor

The work of factory employees that can be directly associated with converting raw materials into finished goods.

Product Cost

The total cost associated with producing or manufacturing a product, including materials, labor, and overhead.

Factory Overhead

All costs related to manufacturing that are not direct materials or direct labor expenses.

Cost Allocation

The process by which factory overhead or other costs are assigned to a cost object, such as a job.