What is the primary drawback to using a volume-driven base,such as direct labor or machine hours,to apply overhead to products in a traditional cost accounting system?
A)The cost accountant may not fully understand how to track direct labor or machine hours.
B)It is difficult for an AIS to incorporate such a measurement into its system.
C)It is difficult for an ERP to incorporate such a measurement into its integrated system.
D)Many overhead costs are incorrectly allocated to products since they do not vary with production volume.

Question

Quizplus · Accepted Answer

Using a volume-driven base, such as direct labor or machine hours, assumes that all overhead costs vary directly with production volume. However, many overhead costs are fixed, and do not vary with production volume. Therefore, using such a measurement results in many overhead costs being incorrectly allocated to products.

What Is the Primary Drawback to Using a Volume-Driven Base,such