Beach City Mountain Goods, Inc. produces a range of high quality quilts with traditional patterns from the NC Mountains, and they also produce a wide variety of baseball caps with university logos from around the state. Being forward thinking, they have long used activity based costing in their manufacturing, but now they consider using some activity based costing principles for their corporate overhead. Biggest cost pools in their corporate office are marketing, CEO salary and fringe benefits, and Research and Development.

How should the sponsorship cost of the annual quilt festival be allocated?

Select one:

a. Only allocate to baseball caps because they do not have a similar festival.

b. Equally over all products according to units sold.

c. They should not be allocated at all because marketing costs are not product costs.

d. Only allocate to quilts because only they benefit from the quilt festival.

e. Equally over all products according to sales volume in US$.