Question

Maintenance costs for machinery and equipment are the largest component of factory overhead for the block...

Maintenance costs for machinery and equipment are the largest component of factory overhead for the block machining department of an engine manufacturing plant. Which of the following would be the best cost driver?

A. Machine hours

B. Direct labor dollars

C. Square feet of floor space

D. Direct labor hours

Business   Accounting   
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Answer #1

Option A Machine Hours is the correct option as the maintenance costs for Machinery and Equipment are directly related to the usage of machinery and equipment, i.e., the machine hours. This is the best cost driver as more the machine hours, more the maintenance costs will be allocated to the machinery and equipment.

Option B Direct Labor dollars is the incorrect option as the amount spend on Direct Labor is not directly related to the maintenance costs for machinery and equipment.

Option C Square feet of floor space is the incorrect option as Maintenance costs for machinery and equipment are not related to the square feet of floor of floor space.

Option D Direct labor hours is the incorrect option as there is no relation between the direct labor hours and the maintenance costs of machine and equipment.

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