Durden Soap incurs the following indirect costs per month:

Utilities	$120
Indirect Labor	340
Cleaning	610
Rent	500
Employee Insurance	220

What might be appropriate costs to pool for allocation purposes?

a. utility costs, indirect labor

b. utility costs, cleaning and rent

c. indirect labor, cleaning and rent

d. utility costs, cleaning and employee insurance

Durden Soap incurs the following indirect costs per month:

Utilities	$120
Indirect Labor	340
Cleaning	610
Rent	500
Employee Insurance	220

If indirect labor and employee insurance are combined to form a pool, what might be an appropriate basis (driver) for allocating these costs?

a.	square footage occupied by each department.

b.	number of employees employed in each department.

c.	number of direct labor hours worked

d.	number of claims on employee insurance.

Durden Soap incurs the following indirect costs per month:

Utilities	$120
Indirect Labor	340
Cleaning	610
Rent	500
Employee Insurance	220

Durden expects to manufacture 80,000 units during the coming year. Why do these fixed costs present a special problem to Durden?

a. by definition, fixed costs do not vary as volume changes.

b. by definition, these costs increase regardless of volume.

c. the number of units could increase, increasing fixed costs.

d. the number of claims on employee insurance could increase insurance costs.

All of the following are reasons that indirect costs are often pooled, and not allocated individually, except:

	a.	individual allocation would be tedious.
	b.	individual allocation would be more accurate.
	c.	individual allocation would be more useful.
	d.	the benefits of individual allocation of indirect costs are greater than the costs.

	Allocation
Department	Base	Product A	Product B	Product C	Overhead Costs
Production	Machine Hours	1,000	2,000	500	$1,400,000
Purchasing	Purchase Orders	100	300	150	$500,500
Inspection	Labor Hours	200	200	200	$300,000

If Total Overhead is allocated based on machine hours, how much would be allocated to product A.

	a.	$ 1,400,000
	b.	$ 314,360
	c.	$ 400,000
	d.	$ 628,710