Question

Exercise 1) After reading chapter 15 test your conceptual knowledge for the material presented in the chapter

a.  Finding a single cost driver that changes in the same proportion as variable factory overhead costs is:

Multiple Choice

• Simplified by breaking out the fixed portion of overhead cost.

• The first step in variable overhead cost assignment.

• Difficult but manageable using advanced statistical techniques.

• An important goal of effective cost system design.

• Difficult, if not impossible, because of the underlying nature of variable overhead cost components

Answer 1

Finding a single cost driver that changes in the same proportion as variable factory overhead costs is Difficult, if not impossible, because of the underlying nature of variable overhead cost components.

Variable overhead are relatively small part of total overhead as a result it is virtually impossible to find a single cost driver that changes in the same proportion as variable factory overhead costs.

Option E is correct