During 2013, the Kemp Construction Company built 23 custom homes that ranged in size from 2,500 square feet to 8,000 square feet. One home was completed each month during January, February, and March. Three homes were completed during April and May. Two homes were completed during each of the months from June through December. Based upon this information, the most appropriate allocation base (i.e., cost driver) for the assignment of indirect overhead costs to each house would be the:
A) Number of homes built during the month.
B) Number of months in the year.
C) Number of homes built during the year.
D) Size of the home.

Question

Quizplus · Accepted Answer

The size of the home is the most appropriate allocation base for assigning indirect overhead costs because it directly relates to the resources used and costs incurred in building each home. Larger homes typically require more materials and labor, leading to higher overhead costs.

During 2013, the Kemp Construction Company Built 23 Custom Homes