Answer (A) is correct . Cost pools are accounts in which a variety of similar costs are accumulated prior to allocation to cost objectives. The overhead account is a cost pool into which various types of overhead are accumulated prior to their allocation. Indirect manufacturing costs are an element of overhead allocated to a cost pool. Ordinarily, different allocation methods are applied to variable and fixed costs, thus requiring them to be separated. Establishing separate pools allows the determination of dual overhead rates. As a result, the assessment of capacity costs, the charging of appropriate rates to user departments, and the isolation of variances are facilitated.
Answer (B) is incorrect because Prime costs are direct costs, and variable administrative costs are period, not manufacturing, costs. The question inquires about indirect manufacturing costs.
Answer (C) is incorrect because Establishing a separate pool for each assembly line worker to account for wages is not necessary under most cost allocation schemes.
Answer (D) is incorrect because Different allocation methods are usually applied to variable costs and fixed costs.
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