Detailed Answer
(b) The requirement is to indicate the reasonable basis
for allocating costs. Answer (b) is correct because there is a direct
causal relationship between the number of components in a
finished product and the amount of material handling costs incurred.
Answer (a) is incorrect because this allocation basis is
related to “batch” costs and not to individual unit costs. Answer
(c) is incorrect because this allocation basis is the traditional
basis for allocating overhead costs to the units produced when
the production process is labor-intensive. Answer (d) is incorrect
because this is not an allocation basis but rather the result of
the allocation process when determining production costs.