Which of the following allocation bases for automation costs would be an improvement over direct labor hours?
A) Number of units sold
B) Direct labor costs
C) Machine hours
D) Direct material cost

Question

Quizplus · Accepted Answer

Allocating automation costs based on machine hours would be more appropriate than direct labor hours as it reflects the usage of machines in the production process. It would also be more accurate as automation costs are incurred due to the use of machines rather than the labor involved in operating them. Allocating costs based on the number of units sold or direct material costs may not be directly related to the use of automation and may not provide an accurate allocation. Direct labor costs may be affected by factors other than automation, such as skill level and wage rates, which could distort the allocation.

Which of the Following Allocation Bases for Automation Costs Would