Question

What is the reason for pooling costs? Multiple Choice To shift costs from low-volume to high-volume products. It is a budgeting technique designed to accurately track fixed costs. Determining a pool rate for all costs incurred by the same activity reduces the number of cost assignments required. This procedure helps to determine which costs are directly related to production volume. It simplifies departmental overhead costing procedures.

Answer 1

Answer:

Determining a pool rate for all costs incurred by the same activity reduces the number of cost assignments required.

Explanation:

Pooling cost typically used when a company produce different variety of products, but there are some similarities of materials/ingredients between those products.

Let's say that a company produce both orange syrup and Blackcurrent juice. Even though other ingredients for both of those products might be different, both of those products use the same amount of sugar.

In a pooling cost, the company will rate cost that incurred from the purchase of sugar in the same activity rather than separating the cost of sugar by each products.