Chapter 5, Problem 1DQ

Why are support department costs difficult to apply to products?

To determine

Identify the difficulty in applying support department costs to the products.

Explanation of Solution

Cost Driver: The cost driver refers to the all the activities on which the money is spent to produce the product or the service. It has a cause-effect relationship with the resources utilized in production. The cost drivers are used to form the activity cost pools.

The support department costs in the production are the indirect costs that are difficult to identify and be associated to the concerned cost drivers. Hence, it is difficult to apply support department costs to the products.