What is the principal reason that direct labor hours are no longer an effective base for allocating indirect costs in many modern manufacturing companies?
A) Automation
B) Workers are not as productive as they were in the past
C) Movement from full-time to part-time workers
D) Changes in generally accepted accounting principles

Question

Quizplus · Accepted Answer

Automation has drastically decreased the amount of time it takes to produce goods, resulting in fewer direct labor hours needed to complete a product. As a result, using direct labor hours as the base for allocating indirect costs is no longer an accurate reflection of the actual use of indirect costs.

What Is the Principal Reason That Direct Labor Hours Are