Predetermined overhead rates in traditional costing are often based on
A) direct labor cost for job order costing and machine hours for process costing.
B) machine hours for job order costing and direct labor cost for process costing.
C) multiple bases for job order costing and direct labor cost for process costing.
D) multiple bases for both job order costing and process costing.

Question

Quizplus · Accepted Answer

Predetermined overhead rates in traditional costing for job order costing are often based on direct labor cost, while for process costing, they are based on machine hours. This is because in job order costing, indirect costs are often driven by the amount of direct labor used, while in process costing, the amount of time machines are used is a more accurate driver of indirect costs.

Predetermined Overhead Rates in Traditional Costing Are Often Based on