Question

Gulshan Parvana operates a machine shop in Istanbul, Turkey. She places bids on small projects in the metropolitan area. Which of the following is most likely to be a cost driver that should be considered when determining how to allocate utility costs?A) number of projects completedB) number of units producedC) number of labor hoursD) sales revenue

Answer 1

Answer:

A) number of projects completed

Explanation:

As Gulshan Parvana is operating a machine shop which generate revenue based on the bids on small projects. So, the most suitable basis for the allocation of utility cost is number of projects completed in the month. This basis drives the utility cost. As revenue and cost are based on the number of bids on projects won and completed in the period is the most suitable basis for cost assignment.