Question

Costs associated with factory insurance, maintenance, rent, property taxes, and other similar items are typically included in manufacturing overhead and assigned to products:

		a.primarily based on whatever technique is easiest.
		b.based on a related cost driver that can be identified and measured.
		c.if not treated as a period cost.
		d,based on the relative sales revenue generated by the product.

Answer 1

option is B

based on a related cost driver that can be identified and measured.

to allocate the expenses in the manufacturing overheads, first cost driver related to expenses and particular activity is identified and cost driver cost per measuring unit is identified by dividing the total overhead or expense by the total of cost driver units are used. After this per unit cost of activity driver is multiplied with the units of cost driver used in a particular activity assigned to a activity or product. for example total overhead related to machine set up is 100000 and total 20 setups are used during the year so per set up cost is 100000/20 =5000 and a product that used 4 setups in a year so in this case set up cost or expense would be charged to this product would be 20000 (5000*4).