If a department identifies more than one cost driver for overhead costs,the department ideally should ________.
A) put 80 percent of the costs into one pool and 20 percent into a second pool
B) select a single cost driver
C) allocate 80 percent of the costs with 20 percent of the cost drivers
D) create as many cost pools as there are cost drivers

Question

Quizplus · Accepted Answer

Creating as many cost pools as there are cost drivers allows for a more accurate allocation of overhead costs by matching each cost with its most relevant driver. This approach enhances the precision of cost allocation and helps in better understanding the cause-and-effect relationship between costs and activities.

If a Department Identifies More Than One Cost Driver for Overhead