In selecting machine usage as the primary cost driver of overhead costs for the Production Department,management feels that there is a direct relationship between the number of machine hours used and the amount of overhead costs incurred.

Question

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Management has determined that machine usage is the primary cost driver for overhead costs and that there is a direct correlation between the number of machine hours used and the amount of overhead costs incurred. This implies that as the number of machine hours increases, so do the overhead costs for the Production Department. Therefore, selecting machine usage as the cost driver for overhead costs is deemed appropriate.

In Selecting Machine Usage as the Primary Cost Driver of Overhead