Choosing direct-labor cost rather than direct-labor hours as a cost driver for overhead implies that _____.
A)higher paid employees use proportionally more support cost
B)higher paid employees use proportionally less support cost
C)direct labor cost data is easier to obtain
D)direct labor hour data is easier to obtain

Question

Quizplus · Accepted Answer

Choosing direct-labor cost as a cost driver for overhead implies that higher paid employees use proportionally more support cost. This is because higher paid employees typically involve more support costs, such as benefits, training, and supervision. Therefore, using direct-labor cost as a cost driver allocates overhead costs more accurately based on the relative consumption of resources by different employees. Direct-labor hour data may be easier to obtain, but it may not reflect the real differences in resource consumption among employees.

Choosing Direct-Labor Cost Rather Than Direct-Labor Hours as a Cost