A managerial accountant has determined the following relationships between overhead and several possible bases: $$\begin{array} { l c }
\text { Basis } & \text { Corralation with Total Overhead } \
\hline \text { Direct labour hours } & 0.842 \
\text { Direct labour dollars } & 0.279 \
\text { Machine hours } & - 0.837 \
\text { Employee minutes in coffee breaks } & - 0.243
\end{array}$$ What is the best basis for overhead application?
A)direct labour hours
B)coffee breaks
C)direct labour dollars
D)machine hours

Question

A managerial accountant has determined the following relationships between overhead and several possible bases: $$\begin{array} { l c } 
\text { Basis } & \text { Corralation with Total Overhead } \
\hline \text { Direct labour hours } & 0.842 \
\text { Direct labour dollars } & 0.279 \
\text { Machine hours } & - 0.837 \
\text { Employee minutes in coffee breaks } & - 0.243
\end{array}$$ What is the best basis for overhead application?
A)direct labour hours
B)coffee breaks
C)direct labour dollars
D)machine hours

Quizplus · Accepted Answer

The best basis for overhead application is the one with the highest positive correlation with total overhead, which is direct labour hours (0.842).

A Managerial Accountant Has Determined the Following Relationships Between Overhead