ICAEW BIP · Chapter 2 · Question 3 of 12
Which basis would normally be most appropriate for apportioning factory rent between production cost centres?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Floor area occupied by each cost centre
Explanation
Overheads should be apportioned on a basis that reflects how each cost centre benefits from the cost. Rent relates to the space a cost centre occupies, so floor area is the most suitable basis. Employee numbers suit costs such as the canteen, and machine hours suit costs such as machine power.
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