Apportionment of factory rent typically uses which basis?
ADirect material
BNumber of workers
CMachine value
DFloor area
Answer & Solution
Correct answer: D. Floor area
1. Cost apportionment requires a basis that approximates the consumption pattern.
2. Factory rent is paid for occupying floor space.
3. Hence the most appropriate basis is the floor area occupied by each cost centre.
4. Number of workers or machine value would not reflect space consumption.
_Source: ICAI BoS Inter Paper 3, Ch 4 "Overheads", §4.3.1 Table_
Related questions
Activity-based costing improves on traditional absorption by:Stores keeping cost is best apportioned to producing departments using:Idle capacity cost should be:Predetermined overhead rate is used because actual rate becomes available only:Departmentalisation of overheads aids:Selling overhead is best apportioned on the basis of:Blanket overhead rate is single rate for:Reciprocal services between two service departments are best handled by: