Gregory Enterprises Has Identified Three Cost Pools to Allocate Overhead

Multiple Choice

Gregory Enterprises has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year:

The accounting records show the Mossman Job consumed the following resources:

Which method of allocation probably best estimates actual overhead costs used? Why?

A) Single direct labor-hours cost driver because it is best to allocate total costs uniformly to individual jobs.
B) Single direct labor-hours cost driver because it is easiest to analyze and interpret.
C) Three activity-cost drivers because they best reflect the relative consumption of resources.
D) Three activity-cost drivers because product costs can be significantly cross-subsidized.