Question

Lunker Lures makes ten different models of fishing lures. All ten models are completely crafted by hand using the same basic materials; however, some of the models are more detailed and/or complex than others. Based on this information, which type of overhead costing system would be the best fit for Lunker

Answer 1

The type of overhead costing system that would be the best fit for Lunker is: Traditional costing system using design hours as the basis for allocation.

What is the Traditional Costing System?

The traditional costing system is a method applied in accounting that aims at determining the cost of production. One driver is assigned as the basis of allocation.

In the case of Lunker Lures above, the driver that is used as the basis of allocation should be design hours.

Learn more about the Traditional Costing System here:

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