Reference no: EM133399996

There are generally many different possible choices of an allocation base/cost driver. This choice determines the cost model - how we assume indirect costs are related to or consumed by the cost object. It also determines how useful is the cost allocation information. Consider a setting where you are an airline company, say United Air Lines. You lease many different gates at Sky Harbor Airport in Phoenix to use for your flights. To make things simple, assume you only lease one gate for some unspecified monthly cost. If the flights (arrivals and departures) that use the gate during a month are the cost objects, then this monthly cost is an indirect cost to each flight. And thus, the gate lease cost will need to be allocated to the flights.

Question

What do you think is the best choice of allocation base/cost driver to use to allocate the monthly gate costs to all of the different United Air Lines flights that use the gate over the month. Justify your choice.