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You are wondering how best to allocate these costs into cost pools. You settle on forming a total of five pools. Volume related costs, allocated
You are wondering how best to allocate these costs into cost pools. You settle on forming a total of five pools. Volume related costs, allocated to products using labor hours. Cost related to executing a production order (this would include first part inspections), allocated using the number of batches. Costs related to inventory, receiving and shipping. These costs would be allocated using the number of transactions per product line (= components number of transactions). Costs related to parts administration, which will be equally shared by all product lines. Facility level costs. You decide not to allocate these costs to individual product lines, reasoning that these costs are not controllable at the product level. Required: a. Verify the profit margin data reported in the problem text, using the current allocation system. b. Compute the amounts in the five cost pools and the rate per driver unit for each cost pool
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