Bridgeton Case Summary

The Bridgeton case introduced a relatively simple costing system: DM, DL, and one pool of indirect, support, or overhead costs. The one and only "cost pool" containing all overhead (OH) costs was allocated on the basis of DL$. In this case, the direct costs seem to be largely variable (i.e., they vary proportionally with production volume), whereas some of the indirect costs are relatively variable and others are largely fixed. Case in point: Not all INDIRECT costs are necessarily FIXED. To figure out which indirect costs are fixed or variable, one may want to use a combination of common sense and some analytical procedure applied to a time series of data across the various indirect cost accounts. There is no GAAP-rule spelling out which method