Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 3

Why do companies commonly use direct labor-hours or direct labor cost but not the number of units to allocate overhead?

Step 1 of 3

Direct Labor:

These are wages to the laborer that have contribution in the production of the company. These people help in converting the raw material into the finished products. These people should efficient as well as effective in their work to achieve the goals of the company and bring down their cost as more as possible.