Which of the following would be the least appropriate allocation base for allocating overhead in a highly automated (i.e.,capital-intensive)manufacturing company?
A)electricity used
B)machine hours
C)direct labor hours
D)material consumed

Question

Quizplus · Accepted Answer

Direct labor hours would be the least appropriate allocation base for a highly automated manufacturing company because machines are doing most of the work, which means there is minimal direct labor involved. Using direct labor hours as allocation base would result in over-allocation of overhead costs to products that do not require significant human involvement. A better allocation base would be machine hours, as it directly reflects the usage of the equipment which is a major cost driver in a capital-intensive company.

Which of the Following Would Be the Least Appropriate Allocation