Which of the following should not be used as the allocation base in a company that appropriately uses a single plantwide rate?
A) Sales volume.
B) Machine hours.
C) Material costs.
D) Direct labor cost.

Question

Quizplus · Accepted Answer

Sales volume is not a suitable allocation base for a single plantwide rate because it does not directly relate to the consumption of resources or the incurrence of costs in production. Allocation bases should be related to the cost drivers, such as machine hours or direct labor cost, which more accurately reflect the use of resources.

Which of the Following Should Not Be Used as the Allocation