Select the correct reasons for allocating overhead cost to the cleanser.

a$.$To value inventory.b$.$To determine profitability.c$.$To plan sales and costs for the coming year.d$.$To motivate managers.e$.$To predict the economic effects of planning and control.

a$,$ b and ca$,$ b and da$,$ b and e

$1$b$.$ How should the cost of the office space and the medical assistant's salary be allocated to the cleanser? Explain.

As long as he sells relatively few bottles of cleanser, it

isis not

necessary to allocate any indirect costs to the cleanser. The medical assistant

isis not

paid the same amount whether she mixes the cleanser or not. The space used to store the cleanser materials is

smalllarge

$,$ and the incremental cost is zero.

$2.$ Suppose that Healthy You magazine runs an article on Dr$.$ Poston and his skin cleanser, which causes demand to skyrocket. Consumers across the country buy the cleanser via phone or internet order. Now, Dr$.$ Poston believes that he can sell about $40,000$ bottles annually. He can hire someone part time, for $$1,000$ per month, to mix and bottle the cleanser and to handle the financial business of the cleanser. An unused office and examining room can be dedicated to the production of the cleanser. Would your allocation choice for Requirement $1$ change in this case? Explain.

Yes, it would definitely change.No$,$ it would definitely not change.Cannot tell from information given.